Health Care Rationing for Beginners

By James Kwak

“Obama-care kills Medicare as we know it. Obama-care raids $500 billion from Medicare to spend on Obama-care, puts in place a 15-panel board to ration Medicare by unelected bureaucrats.

“Our budget, repeals the raiding, gets rid of the rationing board, preserves this program, makes no changes for a person 55 years of age or older and saves Medicare, by reforming it for our generation, so it’s solvent. The president’s plan does not save Medicare, it allows it to go bankrupt, rations the program and raids the program. We get rid of the rationing, we stop the raiding and we save the program from bankruptcy.”

That was Paul Ryan on Fox News recently.

Ordinarily this wouldn’t be worth responding to, except to point out, as Sam Stein did, that Ryan’s proposed budget also “raids $500 billion from Medicare,” so the statement that “we stop the raiding” is, um, a lie. But it isn’t news that Paul Ryan has an issue with honesty, except perhaps for David Brooks.

But there’s a theme that is surfacing that goes something like this: OK, Ryan’s plan is extreme and has no chance. But we all know we spend too much on health care, and we have to spend less, which means that we have to ration care one way or another. Ryan does it by scrapping Medicare in favor of indexed vouchers; Obama does it by reducing Medicare payment rates and, more ominously, with “a 15-panel board to ration Medicare by unelected bureaucrats.”

On one level this seems true. We are projected to spend too much on health care, and we need to reduce those projections. And in one sense, we can call that “rationing.” As you learn in Economics 101, economics is about the allocation of scarce goods and primarily about using markets to allocate scarce goods. If you define rationing as the allocation of scarce goods (where everyone can’t get everything she wants), then obviously we have to ration health care. But just as obviously, we ration it already: we ration health care by denying most of it (except emergency care) to poor people, people without good jobs, people with preexisting conditions, and so on. So the statement that we have to ration care is unexceptional to the point of being meaningless.

But let’s move on to the issue of “we have to spend less on health care.” I’m going to get to the Affordable Care Act (“Obama-care”) and the Ryan budget, but first we need to take a detour through free market fantasy land.

The question is, if we accept the principle that markets are generally the best way to allocate scarce resources, how should this work for health care? The theoretical answer is pretty simple. People who buy health insurance (mainly employers, but also individuals) want decent health care at a reasonable price. They shop among health insurers. Health insurers compete by figuring out how to offer better health care at lower prices. A traditional indemnity plan, where the insurer pays for 80 percent of whatever the provider charges for anything the insured wants, is a lousy way to compete: you end up with not-so-good outcomes at extremely high prices. That’s why most of the private health insurance market today is HMOs (access to procedures is controlled) and especially PPOs (negotiated prices with select providers, low payments to out-of-network providers). In theory, insurers should be figuring out how to get the best health outcomes at the lowest possible price. To do that, they should be figuring out what procedures are most likely to lead to good outcomes and setting payment schedules to motivate patients and doctors to select those procedures; they should also be figuring out what procedures are a waste of money and motivating patients and doctors to avoid those. They motivate patients and doctors by setting low payment rates for worthless procedures or simply refusing to pay for them. That will scare away some health insurance buyers, but in the long run, the good insurers will have better outcomes at lower prices, and they will attract customers on that basis.

Of course, this is all in free market fantasy land. The private health insurance market does not work that way; if it did, we wouldn’t have a health care cost crisis in this country. Why it doesn’t work that way is a subject of much debate. It could be because providers have too much market power relative to insurers; it could be because the main buyers of health insurance (employers) don’t actually care about outcomes, just about offering a decent-looking plan at the lowest possible cost.* But the key point is that competition is supposed to be driving insurers to become more efficient: creating health plans that produce better outcomes and lower costs.

Is this rationing? Yes, in the uninteresting sense that people do not have unlimited access to health care for free. But is it rationing in the commonly understood sense of “something bad where someone unfairly decides you can’t have something you need”? No, almost by definition: when markets allocate scarce resources, we generally don’t call that rationing.**

Now, back to reality. What is that “15-panel board to ration Medicare by unelected bureaucrats” that Ryan is talking about? It’s the Independent Payment Advisory Board (IPAB), which was created by the Affordable Care Act (ACA). IPAB is charged with coming up with plans to reduce the growth rate of Medicare spending without restricting benefits or eligibility. One way IPAB is expected to do this is by analyzing the various pilot programs for new ways of delivering or paying for health care established by the ACA. Using evidence, IPAB should be able to change the way Medicare pays for services to affect provider incentives in ways that provide better outcomes at lower costs — or, at least, ensure lower costs with minimal adverse affects to outcomes. Importantly, IPAB’s recommendations become binding unless overridden by a supermajority in Congress, making it more likely that cost-saving measures will actually become law.

Does this sound familiar? It’s exactly what private-sector health insurers should be doing (four paragraphs up), but aren’t. It’s using research and analysis to make Medicare a more efficient health insurance plan, one that spends less money while maintaining outcomes for participants. Is it rationing? It’s only rationing to the extent that the pursuit of efficiency is rationing. You can call it rationing if you want, but then you have to concede that rationing is exactly what all health insurance companies do, even though they’re not doing it very well at the moment.

If IPAB is just supposed to do what private sector insurers are supposed to do, why are Republicans in such a tizzy over it? One reason is simply that the Obama administration is for it, so they’re against it; another is that they will try to spin anything they can as “Democrats slashing Medicare,” for obvious political reasons. But there is a more fundamental reason.

Republicans like Paul Ryan don’t want Medicare to become more efficient because they want the program to fail. Medicare is a very popular program in its current form; as Jonathan Oberlander details in The Political Life of Medicare, it has always been a popular program with the public. The only way to eliminate Medicare is to convince the public that it is causing some other, huge problem — namely, the national debt. So this leaves people like Paul Ryan in the position of rooting for the Medicare budget gap to be as big as possible and trying to shoot down anything that can actually close the gap. (On the left, I believe this is known as a Trotskyist position — intensifying the contradictions of Medicare. Even if the problem with Medicare is its budget deficit, Paul Ryan and his fellow travelers oppose measures that reduce the deficit because they also reduce the chances of the Revolution.)

What about Ryan’s claim that his proposal “saves Medicare, by reforming it for our generation, so it’s solvent”? As everyone knows by now, the Ryan Plan replaces current Medicare with a voucher program, where seniors get a voucher to use to by health insurance in the private market; the vouchers are set to grow in value considerably slower than GDP, let alone health care costs. This is not Medicare.

Right now, Medicare actually provides two kinds of insurance. First, it is a health insurance plan, which means that once you are a beneficiary it will pay for a lot of your health care expenses. Second, it insures you against not being able to buy health insurance. If you are over 65, it insures you against being dropped by your insurer because you get sick; more importantly (since that is already accomplished by regulation), if you are under 65, it insures that you will be able to get decent (though not particularly good) health insurance when you are 65. Without Medicare, not only would you not have that guarantee (unless you work for one of a small and declining number of employers), but you would not be able to buy that guarantee for any price.

Under the Ryan Plan, both of these kinds of insurance go away. What’s left? A forced saving and redistribution program, where you pay Medicare payroll taxes while you work, and once you retire you get some cash back. You can call that “Medicare” if you want, I guess, but it no longer provides either kind of insurance that Medicare currently provides, so Ryan’s claim to “save Medicare” is, um, a bit of a stretch. But you knew that already.

Is it rationing? Yes, in the vague sense that more people will be getting less of what they want. But the mechanism by which this happens is the same one that already operates in the individual market for people under 65: if you don’t have enough money, or you’re too sick, you just can’t buy health insurance, so you get less health care. If you call that rationing, then the Ryan Plan is just more rationing.

The more relevant question is whether the Ryan Plan will promote the more efficient allocation of health care. You can dredge up a theoretical argument that it would. In free market fantasy land, remember, employers and individuals will shop around for the most efficient health care plans, so insurers have an incentive to make their plans more efficient. The crux of the argument is that since insurers face a competitive market, they will work hard to make their plans as efficient as possible, which means they should do a better job than Medicare, which doesn’t face competition. I’m sure this argument has been advanced a hundred times by Heritage, AEI, and so on.

The problem with that argument is that it’s completely false in practice. If that market worked, then we would have a functioning health insurance market for people under 65 (where there is no Medicare);*** but if we had that, then we would not be talking about health care today.

So yes, the national challenge is spending less on health care in the future, whether or not you call it rationing. The Ryan Plan does it by eliminating Medicare (for all practical purposes) and leaving seniors to depend on their private savings and deliberately underfunded vouchers. IPAB does it by doing what the free market is supposed to do, but doesn’t. IPAB is not a complete solution, and the biggest criticism one can level at the Obama administration is that its enacted and proposed solutions aren’t enough to close the long-term Medicare deficit. (My solution is to increase Medicare payroll taxes to account for the fact that Medicare is becoming more valuable today to future beneficiaries.) But IPAB at least tries to improve Medicare and solve the cost problem. Paul Ryan simply wants to toss the elderly into the same toxic pool that tens of millions of the non-elderly are already drowning in.

* But it isn’t because individuals don’t bear enough of the marginal cost of their health care choices. All insurance markets — life insurance, auto insurance, home insurance, workers’ compensation insurance, commercial liability insurance, etc. — work by shielding people from a large portion of the consequences of their decisions. Yet competition can still work. Besides, as Paul Krugman points out, other industrialized countries have even less “consumer choice” than we do, and they all have lower costs.

** If you do call it a bad form of rationing, then I would argue that free markets are bad because they ration food, shelter, and, for that matter, all consumption goods, unfairly denying poor people of them.

*** You can’t blame all the problems with our health care system on the tax exclusion for employer-provided health care. Yes, it’s a bad thing, but it can’t arithmetically be responsible for health care costs that are twice as high as the rest of the developed world.

65 thoughts on “Health Care Rationing for Beginners

  1. Excellent post!

    One supplementary point would be to discuss WHY the current health insurance market doesn’t work the way it should in free market fantasy land.

    The “free market” does not guarantee 100% optimal outcomes across every spectrum, the way it’s often argues that free markets are a solution for everything. The ONLY thing that free markets guarantee are optimal profitability for the companies involved.

    If the only path to profit were through the hard process outlined in the “perfect world” scenario, that would happen. However, there is a much shorter and cheaper path to profit through selecting the most profitable pooled of clients, as well as undertaking tricky denial-of-coverage battles when you find out that you selected poorly.

    It’s a perfect example of a free market’s failure to ensure the desired public outcome. That is when government has a role to play.

    There are many ways that the government can play a role. One could be to become an insurer (“Medicare for all”). whether or not it’s just another offerer or if it’s a single payer system. Another would be to make it so that it is not allowed to game for profits through covereage selection and pricing; make it a true insurance program of pooled risk. To do that you would have to outlaw denial of coverage AND make it mandatory that healthy people pursue coverage. Of course, such a mandate would be communism…

  2. I posted too soon… my last point:

    At least Obamacare addresses these issues, however imperfectly. The Ryan plan does not.

  3. I know I sound like a broken record, but the answer to reducing Medicare’s costs without reducing its benefits, is to fully socialized it like the Veterans Administration. This would eliminate the Republicons deficit argument, while at the same time be immune from their socialism/communism argument; because, if it is good enough for our veterans, it should be good enough for our seniors

  4. What amazes me is that we have Medicare Advantage which is essentially what Rep. Ryan is advocating for all of Medicare. It has not reduced the costs of delivering Medicare. In fact, seniors that participate in Medicare Advantage cost the Federal Government 14 percent more.
    It appears that Ryan’s plan will only succeed in shifting costs onto seniors. Ryan must be hoping no one will bring up Medicare Advantage.

  5. They want you people to work until you drop dead. If you’re not working, you’re not making them rich(er).

    This is the name of their game.

    After they’ve finally (after 75 years of trying) killed Medicare and SS, the weak will be culled (in a free market kind of way), and only productive (and fearful) drones will remain.

    Their next goal: Eliminate those pesky “wages” they have to pay you.

  6. “when markets allocate scarce resources, we generally don’t call that rationing.”

    ‘We’ may not call it rationing – but that’s exactly what markets do and, on the case of healthcare do very badly due to the perverse incentives which dictate that the wealthy get a lot of unnecessary treatment, while the poor go without necessary care.

    Which is why the market model gives poor results at greater cost than a single-payer system predicated on clinical need.

  7. One of the oft-made claims on the Republican side is that the free market is not allowed to work properly because insurance cannot be purchased across state lines. It sounds reasonable, but I have never seen a serious rebuttal of it. Is that because it isn’t true, that there’s no good response, or something else?

  8. Thanks for sharing James Kwak.I’m impressed, I should say. Really rarely do I encounter a blog that’s both educative and entertaining, and let me tell you, you’ve hit the nail on the head. Your idea is outstanding; the problem is something that not sufficient individuals are speaking intelligently about. I am extremely happy that I stumbled across this in my search for something relating to this.

  9. As others have said, rationing takes place anyway. The question is whether one wants rationing to be solely on the basis of wealth and accessibility to healthcare. Unaffordable medicines and healthcare delivery (doctor visits, procedures, diagnostic and screening tests, etc.) result in expensive interventions later. Strokes, heart attacks, far-advanced cancers result in very expensive emergency and intensive care. There is a monetary cost to healthcare systems and to our governments as well as, in my opinion, a moral cost to the fabric of our society.

    I would rather have rationing on the basis of evidence-based best practice models rather than our alternative, present situation. This will make some providers and citizens uncomfortable, but I do not want to pay for expensive (or even modestly costly) treatments that have unproven or disproven value. Feel free to spend your own dollars on any legal treatment you desire, but please do not increase my taxes or insurance premiums by demanding your right to crappy treatment.

    See “Squandering Medicare’s Money” by Rita Redberg in the NY Times:

    This just scratches the surface.

    Having said all that, I do have a first hand experience with one of our local insurers in Minnesota who allegedly is judging us providers on the basis of cost and quality.* Great idea in theory, but there was so little testing or vetting of the process that the program is replete with errors. My own rating was “too few patients” (with that insurer), but i did review the data and found serious errors. The most egregious was over $3000 in costs due to an anti-rejection drug in a transplant patient. I saw this patient just once, for a problem in no way related to his transplant. I charged a modest visit fee and did limited testing. This software system stuck me with the costs even though I never prescribed the drug. The software did not know how to categorize the drug so it decided that my specialty (allergy-immunology) was the closest match. As I said, a great idea in theory (rating providers for quality and cost), but once you post the results for all subscribers to see you better be right. Otherwise, you are unfairly messing with people’s livelihoods. GIGO.

    *I heard a rumor is that UHC rammed this product (from its Ingenix subsidiary) down the insurers throat because they wanted to say that they were covering all 50 states.

  10. One thing not mention in your analysis that is worth of some attention is corruption. A lot of money is being made by sophisticated sorts of price-gouging. That’s basically why health care is so expensive in the USA.

    Over to the Galbraiths, father and son, I think, though I’m not sure they’ve done much work on health care.

  11. I’m excited that JK takes yet another shot at James Brooks in this post. I’m I the only one who finds it a little weird that JK has such a special and unique hatred for James Brooks?

  12. @Gasgangrene, don’t you mean David Brooks? I too find his brand of “sensible civility” a bit too facile, though I often find myself nodding my head to his calls for moderation. Unfortunately, I am often left wondering whether he is trying for equanimity but winding up just equivocating. In any case I don’t find his postings on the health care issue too helpful, though I’m glad to find a Republican who thinks he’s moderate. There may still be hope for us yet.

  13. For John Doe — the issue is the “race to the bottom” effect we saw when credit card issuers were able to get around usury laws by basing themselves in South Dakota. A (very) small state could allow undercapitalized and unethical insurance companies to offer a “product” that simply doesn’t cover the expensive patients whenever they happen to sign one up.

    Unfortunately, instead of charging people a late fee plus 30% interest when a statement is mailed just a couple of days before due date, the result this time will be the death of the customers.

    State insurance commissioners protect their states’ citizens rather well, and the citizens of each state have the right to the protection their state requires. Using the power of the Federal government to override states by “selling across state lines” almost guarantees death for profit writ large.

  14. There’s another reason why the “individuals don’t bear enough of the marginal cost” argument doesn’t hold water.

    Individuals have plenty of skin in the game, because they’re the ones who bear the misery of sickness as a consequence of their decisions. They still eat junk food, fail to exercise, smoke, etc., but not paying the medical bills has darn little to do with that.

    If anything, a fully socialized system would make things much better on this front as well, because there would be an incentive for long term prevention. In the current private market, there’s almost none, because member churn happens on a much faster time scale than the development of the big illnesses.

  15. James, thanks for the long hard work that you did to produce this article. What you write is correct, at least as far as it goes. The Obama and Ryan plans are both politically motivated crap. The US ranks low in life expectancy and infant mortality amongst the developed countries of the world. That is absurd, since everyone likes to brag about how wonderful our health care is. The best solution, as is agreed by most Americans, including the majority of physicians and other providers, is single payer, or Medicare for all. There are some other effective systems in other countries with much lower costs and much better outcomes. So long as we leave the health oligarchies in charge (insurers, pharma companies, and health conglomerates), we will continue to get expensive, crappy outcomes that have a substantially dilatory effect on the vast majority of our population, and will continue to see health care costs rise as a percentage of GDP.

  16. There’s another reason why free market doesn’t work when it comes to healthcare insurance. For free market to work there must be alternatives, and when it comes to healthcare costs (on which insurance depends) there are no alternatives.
    If you don’t like the high cost of insuring your car you can always not have a car and just take the bus, or walk. If you don’t like the high cost of your healthcare insurance there’s no alternative.
    If you don’t agree with the cost of rebuilding your burned down house you can just rent an apartment. If you get sick with cancer,there’s no alternative.

    As a result, healthcare costs will continue to soar as more and more procedures become available for more and more illnesses. With them, healthcare insurance will soar too.
    The only way to stop the relentless march higher is to agree as a society that there’ll be only so much health care that will be covered, and then as a society cover it. In other words, principled universal coverage.

  17. Thanks for an intelligent and thoughtful discussion of these issues and in particular a clear defense of the IPAB. I agree but throw in these wrinkles: 1. To be maximally effective, IPAB would apply to the whole system, not just Medicare. (Starting with Medicare is what is possible now, and should be defended and applauded as you do.) 2. We don’t really have to ration health care. Cut spending on wars, tax wealth fairly, and spend 98% of the GDP on health care (and other social benefits); why not? The problems are that in the present system incentives are so out of whack it can be hard to tell what’s beneficial and effective health care and what is padding the bottom line of some health-related corporation; and beyond that, as the MD commentator above points out, our knowledge of what actually constitutes optimal care and our ability to measure and operationalize same are – well, still being developed. But it’s where we need to go and the IPAB is a step in the right direction.

  18. Just a note on ‘unelected bureaucrats’

    Here in the UK we have a panel that only select the most cost effective treatments (something like £40,000/life saved is the treshold). Many people mock it, but then, we spend much less on healthcare than anyone else and still get top 10 outcomes.

  19. This is quite related to what I believe is one of James’ (and many other people’s) pet peeve of EMH. The thing that needs to be remembered is EMH only works when strong competition is part of the equation. When competition is left out of the equation, EMH will fail 99% of the time. If you had health suppliers competing against each other for Medicare contracts, it might work better. Of course we know the truth of the situation here. Paul Ryan gets his health care from the same place that Republican Senator Chuck Grassley gets his health care. I have yet to figure out why not one single high-profile journalist asks Grassley or Paul Ryan (directly, face to face) why Paul Ryan and Grassley don’t refuse the “inefficient government” health care that they receive at very low cost, perennially year after year after year.

  20. Moses, I would say that the EMH fails 100% of the time without competition. If it does ‘work’ it is purely by chance. In their analysis, there has to be an assumption of a ‘highly competitive market’.

  21. If Paul Ryan really cares about providing health care for everyone, and lowering the costs (I would assume IF Paul Ryan isn’t reading from the playbook/script handed to him by his buddies in the health insurance lobby, Ryan also cares about lower costs offered by private companies) Ryan might look into these obvious inefficiencies of private health care suppliers:
    and here:

    As usual it’s easy to see where Paul Ryan gets most of his policy ideas: from his campaign contributions war chest. I’m not sure if David Brooks saw this before he started slobbering and drooling over Paul Ryan, but Mr. Brooks might want to take a look.
    Well kids, as you can see if you click the link just above, Paul Ryan’s top contributors are #1: Oh!! Gasp!! My G-d!!! It can’t be!!!! David Brooks didn’t mention this in his slobbering lovefest for Paul Ryan…..?? Ranked by industries, Insurance is Paul Ryan’s #1 contributor from 1998—2010 with $703,003, with the vast majority of that from PACs. And lets look a little farther down the list here….. Oh!!! Gasp!!! Holy Phoney Politicos!!!! Brooks didn’t mention this!!! Ranked #4 of all industries on the list of campaign contributors to Paul Ryan from 1998—2010 is……… drumroll please………. Health Professionals with $473,249 and way over half of that from PACs.

  22. Much like a car, the cure is in the preventive stage, prevent the vehicle from breaking down and you bring down the cost per mile. Drive carefully (no accidents or broken bones) means no additional insurance costs. And if you are both healthy and rich, don’t buy insurance, just pay for the dentist or operation every 6 six months (preventitive) or every 30 or 40 years as needed. Its really that simple folks, take care of yourself, for that is all there is of you.

  23. The choice before the country is whether health care in America should be rationed by price (Ryan) or by government fiat (the IPAB in Obamacare). On average, doctors have higher IQs than lawyers and are adept at figuring out how to scam Medicare no matter what the rules are. Trust me: go with Ryan and ration by price.

  24. Mr Kwak seems to offer three alternatives:

    1. Obamacare

    2. Ryancare

    3. Kwakcare [“My (Mr. Kwak’s) solution is to increase Medicare payroll taxes to account for the fact that Medicare is becoming more valuable today to future beneficiaries”.] The reason that Medicare is becoming more valuable today is that its pricing is artificially low. The Kwak solution: if we continue to increase the value today to future beneficiaries we can continue to raise payroll taxes. Sounds like a perpetual motion machine to me – until it stops.

    The problem with all these solutions is that they don’t go far enough. They don’t eliminate the present employer-based system, which is outdated and outmoded. They don’t engage the consumer, in place of employers, in making the first health care decision, much less the last. (I know: consumers are not capable of making wise decisions on something as complex as their health care. Much better that we institute the IPAB to help them through.)

    There’s a train wreck coming, folks, and none of these “solutions” provide universal care while rationalizing costs. For those who might prefer rationalizing to rationing, these solutions are a road to nowhere.

  25. James, the only realistic solution is to expand Medicare into Medicare for All, either with reasonable premiums charged for those under retirement age or a Medicare for All tax, as Ted Kennedy several times proposed. This would save money for the vast majority of Americans and take a burden off businesses, so it is politically possible. Anything other than making Medicare into a single payer system is bascally moving around the deck chairs on Titanic. Unless progressives start supporting Medicare for All loudly and clearly, we’ll never get there. We’re falling farther and farther behind the rest of the industrialized world, and there’s not much more time left. Forget the small bore plans and start laying the groundwork for real reform. I hope you’ll visit Vermont sometime and report back on how their new single payer system is shaping up. Thank you.

  26. No system of Medicare or insurance company subsidies is going to provide needed care at reasonable cost to taxpayers until we get a handle on medical costs. Why do we have a system that is twice as expensive and far less efficient that other nations? What are they doing that we aren’t? What do they pay for prescription drugs? Why must we pay double or triple as much? What standards of efficacy do they require before allowing a drug to be sold? How are their hospitals operated and how much are they compensated for services? Why are so many hospital chains in the US so profitable and why are their managements so anxious to buy them out, repackage them and resell them to public investors at huge profits? Do we need more physicians? Can more folks be just as well served by seeing less expensive nurse practitioners? The questions go on and on.

    But the fact is we aren’t going to reduce the cost of Medicare or any health care delivery system until we begin to contain the cost of care. And while the affordable care act takes baby steps in that direction, it ignores much of the waste and abuse in the current system, from out of control advertising costs to out of control profit margins at every level in the system from insurance companies to drug companies to hospitals to pharmacies to primary care providers to medical technology companies, etc. Cost containment will require rationing, among other things. But without cost containment there will be much more rationing in the future and, as noted, all approaches require rationing.

  27. Mr Kwak poses the question “if we accept the principle that markets are generally the best way to allocate scarce resources, how should this work for health care?” He then answers “The private health insurance market does not work that way..” He seems to miss the obvious fact that health INSURANCE is not health CARE! Yes, insurance companies do try to contain the costs of health care, but ultimately, they PAY for health care, they do not produce it and do not control the costs.

    For a free market to work, the health care provider (HCPs) must be subjected to free market forces. Instead, we have a system in which HCPs are allowed to band together to negotiate for the highest prices they can! Imagine if consumers purchased gasoline through this model, buying vouchers for gas. Rather than compete against each other, the major gas companies band together to negotiate price with the various voucher companies. The only competition is between voucher companies. With no price competition, the gas stations would compete instead on services, offering attendants to pump gas, wash windows, perhaps offer free snacks. Does anyone really believe this would result in lower gas prices? Yet this is the model we have for our health care system.

    If we are to slow the growth of health care costs, we need to change the system so that HCPs compete against one another. Neither ObamaCare and the IPAB nor RyanCare does this. Both continue the anticompetitive system we currently have, somehow hoping that the intermediary payer will somehow lower the prices the HCPs charge.

  28. There’s a simple way to force some honesty back into the discussion.

    The starting ground rule should be that any change must start to be phased in immediately and fully phased in after 2-3 years.

    IMO, the most nonsensical part of the Ryan plan is having it not apply to anyone 55 or older. If the plan is such a great plan, doesn’t cut benefits, gets costs under control, relies on the free market, all that motherhood and apple pie stuff, then why not do it NOW, instead of essentially doing NOTHING for the next 10+ years?

    Why is no one calling Ryan on this? Everyone is complaining about the vouchers, how they’ll only fund some limited percentage of premiums, etc. but no one is calling him on the thinly veiled smokescreen he has layered on top of it.

  29. It should also be noted (if someone already mentioned this, sorry), but one reason the insurance market is not competitive is that the industry is exempt from the Sherman and Clayton Acts under a 1947 law that has never been repealed. So, they can (and still will, under the Ryan plan), collude, price fix, etc. This “bug” — actually a feature, since the industry is a big campaign contributor, and likes things just the way they are — in the system is a huge barrier to fixing the system.

  30. We know Big Insurance doesn’t compete. It just adds increased health care cost to the premium price and adds its margin. To the extent they compete, they do so by wining and dining (and more?) the corporate HR folks who make the contract decisions.

    Let the government, operating pursuant to the rules that apply in lower-cost markets (read: ALL) offer insurance coverage at Medicare rates and below. Private insurers won’t compete, and insurance buyers will flock to the government sponsored programs. For those who want to obtain elite care levels, let them buy supplemental private policies. Everyone gets basic care at reasonable costs (at least until the lobbying begins), the well-to-do get the gold plated policies they crave, costs are reeled in and those who suffer, if any, are those who exploited the system in the first place. No constitutional issues, Medicare becomes pay-as-you-go by charging reasonable rates to everyone and the mercenaries in the health care war find themselves out of work.

  31. Mr Kwak posts about health care every so often.
    When he did so recently, I reminded him of two
    extremely well-known facts:
    1. The United States spends more than 16% of its GDP on
    health care. No other developed country, except France,
    spends as much as 10%, and France spends almost 11%.
    2. The United States, as a whole, gets very little in
    the way of health care for its extra 5% of GDP. For
    among developed countries it lags behind many others
    in almost all measures of health, from longevity to
    infant mortality, to measures of women’s reproductive

    So strange. In private E-mail exchange, Mr Kwak
    assures me that he knows this. He wrote me also
    that he agrees with Dr Geoffrey B. Gordon, who also posted to the same effect.

    Yet here Mr Kwak is again, writing “But we all know we spend too much on health care, and we have to spend less, which means that we have to ration care one way or another.”

    No. We have to find out what we Murricans, alone
    among developed countries, are doing wrong. Is it
    not clear that the 5% of GDP which we use on health
    care, and which other countries save for other
    purposes, is due to the fees siphoned off by
    our burgeoning Health Care insurance industries?

    I don’t want to do all the work, so I invite
    other readers — even Mr Kwak — to find, and
    post here, the compensations of the CEOs of

    I’ve submitted “guest posts” to Mr Kwak on this
    subject. He’s rejected them: “because we rarely
    if ever publish unsolicited blog posts”. (This
    is discouraging because it means that new blood
    will not enter this blog — I for one go for
    weeks without reading it)

    But I did take a look yesterday and find out
    that Mr Kwak has written “Health Care Rationing
    for Beginners”. I am waiting for: “An Indictment
    of the American Health Insurance Industry, for
    People of Sense”.

    I note that several other commenters have mentioned
    Single Payer. Perhaps next time Mr Kwak holds forth
    on health care, we all should shout the comment:
    S I N G L E P A Y E R ! ! !
    It would be good to find some way of catching
    Mr Kwak’s attention.

    Best wishes,

    Alan McConnell, in Silver Spring MD

  32. @ Alan McConnell

    How dare you rashly criticize Mr. Kwak for your failings!

    If you have facts and information…please, by all means share with others – thusly, this independent thinking board can have a formal dialogue per usual.

    Mr. Kwak’s, prerequisite last I checked, was to “seed discourse”…letting the board prune the scion within, into fruition. This subject matter is nothing-more, or none-the-less, a myriad pinhead tittering on a multitudinous plethora’s of thirty years layered complacency regarding, “America’s HealthCare Issue”, period! So please. Let us not kill the messenger? He has a full time job, a family to support, a working spouse, and last but not least a promising career to follow. We all should be grateful for his attributes creating this blog,…
    Yours truly

  33. I am a family physician with over 35 years in practice and the first thing I have to say about Medicare is that is an unabashed blessing. I was seeing patients before it started. In our ER (in Boston) about 20 per cent of our admissions were ill elderly folks literally abandoned at the ER by their families because they did not have the resources to care for them. In the 1960s 35 per cent of the elderly were indigent, chronic diseases were becoming prevalent, and medicine was becoming truly efficacious. Many states (e.g. California, New York) were in financial difficulty because they could not afford to continue to provide care for the indigent elderly. Of course, the free market offered up no solution and commercial insurance wanted nothing to do with these inevitably expensive patients, so there was a substantial need for the federal government to step in. Needless to say, the rhetoric at the time from the likes of the Republicans, the AMA, and still private citizen, Ronald Reagan paid little attention to these practical realities.
    In the macro picture of economic and public policy, one could say, and I believe – in agreement with most first world countries, that medical care is a “public good” and that it ought to be universally provided, readily affordable, and publically regulated so that any “rationing” should be just and equitable across the country’s population. Any economist interested in real world case studies should be able to infer that over the last 40 years the (“free”) market mechanisms used to deliver health care have dismally failed in the United States. We pay substantially more and have poorer health and disease specific outcomes than other wealthy countries and have 50 million uninsured residents to boot.
    In my practical experience the greatest barrier to cost savings and good health outcomes today in the United States is the commercial insurance industry. I see fully insured patients every week who are avoiding diagnostic tests, needed surgeries, and important medications because their co-pays and deductibles have risen to the level of unaffordable – and this is in addition to their incredibly high premiums. Our experience over many years shows that profit maximization has not been compatible with health care optimization. To be specific: In 2009 while we were having a national debate about the costs of our medical system the five biggest health insurers (WellPoint, United Health, Humana, Cigna, and Aetna) had a total profit of $12.2 billion – a 56 per cent increase over 2008 – while their combined enrollment fell by 2 million people ( 2 per cent). Getting rid of sicker folks certainly improved the bottom line – this was an explicit strategy at Aetna and they bragged about it to Wall Street. The bad economy and the high co-payments and deductibles are preventing enough care that their profits will be substantially higher in 2011. Furthermore it is well documented that the medical loss ratio (the total of administrative – operational – expenses and profit) for the major health insurance companies runs about 15 to 20 per cent year after year. If you add the operational costs of my medical group (to contract with insurance companies and providers and to manage cost saving and quality assurance activities) which run 11 to 15 per cent per year you can see that the financial cost to create a “free” market health system consumes 26 to 35 per cent of the premium dollar, diverting huge resources away from medical services. And this does not include the costs in my office and that of every other provider to deal with the complexities of multiple payers. Can any economist see this system as efficient?
    It should be noted that the overhead (“medical loss ratio”) for Medicare is 5 per cent. This efficiency would be sacrificed under the Ryan plan. In addition the Affordable Care Act gives a passing nod to this problem by requiring insurance companies to spend at least 85 per cent of the premium dollar (80 per cent for small business and individual policies) on medical care. Please note this is no improvement over current performance.
    Previously it was an astonishing financial benefit to commercial health insurance companies that the federal government would take a large number of very expensive – the elderly, the permanently disabled, and those with end stage renal disease – patients off their hands and out of their actuarial calculations by enrolling them in Medicare. Congressman Ryan should be able to recall that just recently under President George W. Bush the Medicare Advantage Program was developed in pursuit of the benefits of the “market” for Medicare beneficiaries and for hypothetical improvements in quality and cost savings This allowed Medicare patients to enroll in commercial health insurance plans (both PPO and HMO). And in order to tempt the insurance companies into the market substantial subsidies were provided out of Medicare funds. Well, Congressman Ryan should take note that this experiment was a total failure, in that care was not improved and the patients enrolled in commercial insurance were 11 to 19 percent more expensive to Medicare than if they had not gone into this program. In fact, the White House estimates that fully $50 billion dollars of the projected $120 billion in savings from Medicare under the Affordable Care Act by 2015 will be in recouped losses by ending the Medicare Advantage subsidies.
    Finally let me say that Congressman Ryan is perhaps unwittingly proposing to do for seniors exactly what the Republicans have been criticizing the Affordable Care Act as doing for everyone else: that is, providing premium subsidy to the qualified for commercial health insurance. This reveals the economic Alice in Wonderland character of health policy reform in the United States. Instead of recognizing the “public good” nature of health services, the value of universal enrollment, and the proven financial and economic efficiencies of Medicare, in addition to its extraordinary value as a safety net program, and using it as a model for reform, the White House and Congress, with a great prod from the lobbyists, have taken us down the path of federal subsidy of the profit maximizing but health impairing commercial health insurance companies. This is a great lost opportunity.

  34. “IPAB is charged with coming up with plans to reduce the growth rate of Medicare spending without restricting benefits or eligibility. One way IPAB is EXPECTED to do this is by analyzing the various pilot programs for new ways of delivering or paying for health care established by the ACA. Using evidence, IPAB SHOULD BE ABLE to change the way Medicare pays for services to affect provider incentives in ways that provide better outcomes at lower costs — OR AT LEAST, ensure lower costs with minimal adverse affects to outcomes.”

    It’s important to note the hedging words in this Kwak statement. Does he believe such a body can actually do this? I would wonder how we prevent IPAB from being captured by the drug companies or high tech machine manufacturers whose quests for profits now drive up medical costs? How will we know whether “effective treatments” are indeed that and not just something to benefit commercial interests?

    And doesn’t their mission to reduce costs necessarily result in “restricting benefits?” Benefits that cover types of care IPAB determines are not “effective” will definitely be “restricted.”

    You can’t control Medicare costs without rationing, whether it’s done by the market or some appointed government body. At least both sides should be honest about this.

    We also need discussion about personal responsibility for maintaining good health, that does not simply mean taking your meds.

  35. Congressman Paul Ryan’s statement calling the Independent Payment Advisory Board (IPAB) for Medicare under the Affordable Care Act “unelected bureaucrats” who “ration” care is pure demagoguery and it needs to be confronted and stopped and not debated. Just like the discussion over so called “death panels” raising the issue this way is horribly destructive to public debate and, in the end, to the creation of needed public policy. In this sense Mr. Kwak’s discussion is well focused and responsible. Congressman Ryan is irresponsible in turning this into an econometric and moralistic discussion about rationing. It is really a Libertarian argument about destroying government.
    In fact, Medicare is one of the few places in the United States health care system where money saved on unnecessary care in one instance can be successfully reallocated to better health services elsewhere. As Kwak points out the whole medical system needs sophisticated outcome assessment (Is this “regulation”?) to promote quality, control costs and save money to optimize healthy states. (This is strictly analogous to the need for new regulation in the financial sector to restrain entrepreneurial over reaching.)
    As a country we and the medical profession have benefitted from professional and governmental medical standards and advice institutions over the years. The most prominent is the Food and Drug Administration (FDA.) For all its faults the FDA has by and large had a significantly large impact on the responsible use of pharmaceuticals. Nonetheless, we have to recognize its occasion practical imperfections such as occasional unexamined acceptance of input by commercially involved parties and the implementation of pharmaceutical patent law passed by Congress which is commercially beneficial, but not in the public interest. Medicare needs more formal input like this. With 46.5 million enrollees there is lots of quality improvement and money to be saved by guiding medical decisions. Medical culture needs input and, frankly, after practicing as a family physician over the whole life of the Medicare program I have not experienced, nor can I recall any of my colleagues being impacted by an arbitrary or unprofessional mandate or decision by “unelected bureaucrats.” There are lots of medical procedures which Medicare should not pay for. These are beyond dispute. The program no longer pays for the amputation of the wrong limb, for bed sores developed in a hospital setting, etc. The medical literature is full of reports of medical interventions carried beyond their well recognized indications such as mammograms for low risk women over 80, prostate specific antigens for men over 75, implanted cardiac devices (very expensive) without trials at more conservative therapy, MRIs at the first indication of back pain and so on. Money saved by implementing medical oversight and standards in these areas can be used elsewhere or prolong Medicare’s fiscal life. People more interested in the benefits and tensions raised by government input into quality standards should study the history of the National Institute for Health and Clinical Excellence (NICE) in England.
    Finally, and more to the point, but well below the radar of public or Republican attention are the many parts of ACA which promote primary care. Now here is a situation which is truly a market failure. One of the major contributions to quality of care and cost effectiveness around the world has been the role of primary care physicians. In most countries the ratio of primary care to specialist physicians is 2 or 3 to 1. Here at home the ratio is reversed – 2 or 3 specialists to each primary care doc and it’s getting worse. Uncoordinated patient journeys through the health care system (? Consumer choice?) often start with a trip to the specialist office where care is generally more intensive and complex and myopic (in the face of multiple problems.) The market failure lies in the puny amount of public support for doctors to choose primary care, the now current extraordinary expenses for a medical education (amounting often to over $200,000), the long hours in practice, and the relatively low payment by both commercial and Medicare insurance for primary care “evaluation and management “ services. Thus given free choice it takes a very idealistic student to choose primary care. Fewer have done so recently and the country and the health care system have suffered. Almost ten years ago (Journal of the American Medical Association, 289, no.3 (2003) pages 305-312) an excellent study of Medicare patients showed both dramatically improved quality of care and lowering of costs across the various states associated with increased number of primary care docs per capita and inversely associated with the number of specialists per capita. QED.

  36. @ Jeoffry B. Gordon, MD, MPH

    My good man…now that’s what I’m talking about – right from the horses mouth. I only wish there were more pages to turn from your expertly written comment. Thankyou :-))

  37. The “unelected bureaucrats” line is what disqualifies him from serious discussion. This kind of invective plays to peoples’s fears and fantasies. Are Supreme Court justices unelected bureaucrats? Are soldiers unelected bureaucrats? How about his staffers? How about the top military brass who have some power over our nation’s national security decisions? I don’t remember voting for them. They worked their way up through one of the biggest and best bureaucracies in the world. I give them credit for it. I bet Mr Ryan wouldn’t use that phrase when talking about the military because it doesn’t play well. He is pure theater and should be forcibly moved from Washington to Broadway where his, um, talents, can do less damage.

  38. HERE, HERE, Calvin. I second your motion. Joe Broadway that is.

    And don’t forget about all those student loans out there that can’t be repaid without a job. It will be a hugh funnel for the military heads, for some time to come. And I don’t see anyone dismantling the military any time soon, do you?

  39. Kwak,

    For a Yale law student, perhaps you didn’t pass your antitrust class.

    Ever wonder why you can’t buy Blue Cross of CA when you reside in Michigan and why the two Blue Cross companies can’t compete across state lines?

    It’s called the McCarran-Ferguson Act, passed in ’45 by a Republican and a Democrat and it effectively exempts insurance companies from antitrust action.

    If you want to really have a free market work, then you’ll have to repeal McCarran-Ferguson — otherwise it isn’t and hasn’t been a free market since 1945.

  40. @LHF

    ” I would wonder how we prevent IPAB from being captured by the drug companies or high tech machine manufacturers whose quests for profits now drive up medical costs? How will we know whether “effective treatments” are indeed that and not just something to benefit commercial interests?”

    Actually, there really is little danger of this. If you go back to the text of the ACA itself, you will see that notwithstanding the ostensible purpose of the IPAB, the statutory language specifically prohibits them making certain types of recommendations–the list is long. When those are taken into account, it is quite clear that the ACA’s version of an IPAB is neutered from day one. There will be no need for the health care industry to spend even a dime on capturing it because the health care has nothing to fear from this paper tiger.

  41. @Jeoffry B. Gordon, MD, MPH
    “…the now current extraordinary expenses for a medical education (amounting often to over $200,000)”

    Actually, that is a lowball estimate of the cost. First of all, at a non-state school, that is just the cost of tuition. But there are living expenses as well which can easily top $6,000 per year; text books and medical equipment are expensive and add a few thousand a year more.

    Crucially, except for the children of the wealthy, this is unaffordable and is typically financed by taking on debt. This high level of debt cannot be serviced during 3-10 years of residency training, so the accruing interest is then added on to the balance. By the time you are ready to get a real job in practice your debt load is the magnitude of a home mortgage. At that point you are simply an indentured servant to the finance industry.

  42. Ref: “Clayton Anti-Trust Act” of 1914

    Google @ Business Law – What is the “Sherman Anti-Trust Act” and the “Clayton Act”?

    Ref: “Statutory Provisions and Guidelines of the Anti-Trust Division” (Related healthcare[?])

    Click to access chapter2.pdf

    “McCarron-Ferguson Act” ( The Anti-Trust Act of 1945)
    Ref: “Health Insurance Competition”

    Finally. I’ve saved the best for last. Sad, so sad?
    “Final Healthcare Reform Bill Enacted”

  43. Just for the record, when Bob Barr ran for President as a member of the “Libertarian Party” against Obama and McCain, the Libertarian website had a SIMPLE explanation of *government*. I have a copy from that time, oh so long ago – “The only role of government is to protect the individual against force and fraud.”

    Look how quickly THAT Libertarian Party got trashed by the gang in charge of the ‘hood. Why is there not only no Democratic candidate for 2012 Presidential race, but also a joke of a slate of Republicans?

    The neighborhood is under the rule of a bloodthirsty GANG.

    Ryan’s Plan is belly-up-to-the-bar hooliganism – reeking like a nasty dive bar of puke and cheap beer. And they’re calling his *act* COURAGE. Courage – even Cheney says he worships the ground Ryan’s walking on…

    Shame on everyone for letting this *act* frame the conversation.

  44. A couple a three points.

    1. Let’s take a leaf out of Frank Luntz’s play book — or George Lakoff’s, if that’s who floats your boat on framing-the-debate rhetoric — and call it now, and forevermore, at least until it goes away: VOUCHERCARE.

    Two additional points have not been much commented on in the current debate.

    2. Big Insurance is not a competitive market driven industry. It’s a frigging oligopoly — with legal cover for having that status since the late 1940s. There are many things wrong with Vouchercare, but from a theoretical point of view it rests on an erroneous factual premise that there is actually any meaningful competition among the Big Insurers.

    These guys have long since cartelized the ESI market* and are up to their eyeballs in moral hazard themselves. The proof of this is that their profits have been going up faster than medical inflation. That’s because they have been operating in a classical oligopolistic environment where they can simply pass along provider increases** and transfer the cost to the consumer/employer by either raising prices and/or cutting coverage.

    All the while making sure that their profits keep going up — in good times and bad.

    Kwak gets close to this point when he talks about the insurers de facto not seeming to exhibit the zeal to actually reign in costs — rather than simply shift them. But he doesn’t clearly point out one of the principal Econ 101 reasons for this, namely, that we have an oligopoly at work here. If you believe these guys are driven by competitive market forces, then you probably also think that Big Oil is not an oligopoly.

    The statistics to prove this are out there.

    Click to access 411915_public_plan_option.pdf

    The above link is an example of just one study on the issue in the context of why a Public Option is necessary.

    Specifically, a Public Option is the only thing that would get these guys to even consider getting truly competitive. And then when they did not — as is predictable from the long and conclusive experiment we’ve already had on Medicare Advantage plans — once you could overcome their attempt to circumvent competition through lobbying, they would drop by the wayside PRECISELY BECAUSE OF TRUE OPEN COMPETITION FROM A PUBLIC OPTION.

    And we would then evolve rapidly from there to single payer — with the winner being truly not-for-profit.

    Let the private insurers who survive pick at the margins for the supplementary insurance market. Though manifestly not in the context of Vouchercare where the “supplementary” market in the form of Medigap policies will rapidly be forced take on the role of providing the majority of the coverage – for an inflated price, of course.

    3. Which brings me to my third point. Wanna know another – and particularly smarmy — way Paul Ryan has been trying to mislead on Vouchercare?

    He says Vouchercare will be the “same” as the plan he has for his FEHBP government insurance.

    No it won’t.

    Yes, when Paul Ryan finally retired from Congress with his Congressional pension, he would go on Vouchercare along with the rest of us. But as a Federal retiree he would be able to simply flip his current FEHBP over to become his Medigap plan – no questions asked, totally his option. And guess what? His Medigap policy – but not yours and mine unless you happen to belong to a union that Ryan et all have not been able to decimate – will:

    a. Continue to receive a minimum of a 72% premium subsidy from his employer – that would be us the taxpayers.

    b. Be indexed in its coverage and premium subsidy at medical inflation, not the “same” age adjusted or CPI inflation indexing that the rest of us schmucks on Vouchercare care would have.

    So that yawning gap that would grow between our incredibly shrinking Vouchercare and what our medical needs are? That gap which only the well off among us would be able to supplement through out own Medigap policies – whose costs would rise in tandem with the decrease in the value of Vouchercare – nay, at a greater rate as the private insurers who write these policies continue to jack up their profits and not make any particular effort to hold down costs?

    Well, Privatizing Ryan – along with all those other <55 “courageous” Republican advocates for the common good – would be significantly buffered from absorbing those transferred costs in their “same” coverage scenarios because of taxpayer largesse.

    Are you sure I can’t go all Matt Taibbi on this hypocrisy?

    * The <65 individual market is basically the crumbs that no one really wants. And take a guess as to has a 60% share of the Federal Employee Health Benefit Plan (FEHBP) market, the Plan which Paul Ryan himself is on, which is functionally simply another ESI set of plans? That would be Blue Cross. What? You think anyone is going to “competitively” knock Blue Cross off that perch?

    ** With Big Hospitals themselves effectively having an oligopoly as well, especially the saintly not-for-profits who dominate the Medical Research Center hospitals, where executive compensation somehow keeps going up a lot faster than even medical inflation.

  45. And while the beginners debate health care, the stage is overwhelmed by fraud of the longest and deepest type.
    The promised payment of 190 tons of gold due in 1978, has just been proved to be plated titanium stored in Fort Knox. The 2 gentlemen who proved the case are now arrested for rapeing some New York maids on their way out of town. In responce, Putin (who apparently had a stake in the 190 tons) is lifting the ban on exported wheat. Thus taking away profits normally deemed to be Americas. The global trade war is on folks, grab what you can while you can before its too late, or continue to psyco babbel about issues of little concern to the intellectual elites.

    This probably occured when we got off the gold standard in 71, because we payed our debts with our last remaining reserves. But held just enough gold to clad enough to create another ponzi sceme which only now is comming to see the light of day. Mostly in the form of printed dollars backed by the full fatih and credit of the USA. This basicly proves we are totally bankrupt and the result will be higher prices from anything imported, you all should hope that it is not food of any type or future food riots will invade your city and town one day.

  46. So in a free market illness and death are commmodities for corporate profit.

  47. No need for rationing….increase the supply….outlaw the SEIU and AMA and see how costs, like salaries, crash. How about importing some more GPS? Silly talk of rationing.

  48. @ anonymous

    Ideed…and let me add

    “as is higher education a national security risk to the hoarding of energy-savings patents being mothballed for a patriotic [?] american multinational’s expense account – all for the good of the countries security – and the free rollin commodity train keeps gathering momentum as the plebeian feels the real compression of serfdom roasted in a “Red-White-Blue” sauce of wonderment?”

  49. Until the former U.S.A. lowers its current 17 percent of GDP spent on health care versus the next highest OECD country (Switzerland) with 10 percent, ANYTHING the U.S. does is futile.

  50. How can Medicare be fixed when the cost of the entire medical delivery system in this country is out of control?

  51. A few entries above identified why the market forces don’t push healthcare costs down. Physicians have a cultural status that includes wealth. The physicians are a scarce resource. There is no incentive to reduce prices. One way to remove that leg is to increase the number of doctors. Then the market effects model that anticipates reduced prices, has the parts in place needed to work. Legal prices have fallen. Medical prices will too.

    I want more medical services not less. I have to postpone treatment now because the cost is too d*mn high!

    I like the idea of free medical school for those that can do the work. If the student isn’t able to do the work, then they can transfer to another education path.

    On the point of affordability, most writers to this blog never question the orthodoxy about the U.S. not having the money. Many posters have repeatedly written extensively challenging that misconception here.

    On one hand, the argument is that the public sector creates the wealth by using resourcing and producing marketable products. On the other hand, some argue that government spending crowds out the private sector. That inconsistency doesn’t hold up if what the private sector does is sell things to willing and capable buyers. If there are resources to buy and productive capacity is available, why shouldn’t the government act as the willing buyer so that the private sector can hire, thereby reinforcing a virtuous circle? If the private sector used up all of the resources and still pushed spending into the economy (demand pull) then inflation would increase just as if the government did it. I can hear it now, ‘…the government won’t stop. We can’t trust them.’ We often ignore that we are the government. We have the best one working inmho. OBTW, government employees spend their checks. None I have known eat their paychecks.

    It seems to me the popular debate is using empty points and so is obscuring the actual concerns about why they oppose fiscal stimulus for some reason. The bond markets still buy guaranteed bonds with low yields. As long as the U.S. can make things and feed its population, the country is solvent. Bond traders get a free ride with treasury notes, btw. If China were to dump dollars that they have recorded in computers in the federal reserve system (so that they can buy things and services from U.S. companies …), I’m certain that bond traders would buy them at most any price the fed sets that will bring an attractive (depends upon the buyer and their reasons) return. If not, we can erase the Chinese accounts and move on.

    Look for the money… Someone benefits from this stalled debate. Not most of us.

  52. @ Carol

    I’d like to begin with the: ___ 1st, 2nd, 3rd, & 4th most expensive and critical criteria for Hospital’s/ ER’s, Clinic’s (walk-in/ network affiliate) and HMO’s Medical Centers[?]. I’ve chosen these four [4] because of my personal experience (JMHO), and their tremendous cost add-ons to the total billing process/ charges.

    CT Scan’s – MRI’s – Mammogram’s (all x-ray/ magnetic resonance inclusive), and lastly “Blood Lab-Work Diagnostic’s”.

    The Government can, and should put out open bids for the four [4] criteria mentioned above to the “Original Equipment Manufacturer’s (OEM’s)” in the United States and agree upon a purchase (so many units per annual)
    price to be forwarded too all healthcare entities mentioned above interested in purchase/ need. What’s more important – less paperwork and hands in the pot, which will certainly cut (lower/ fingers crossed[?]) out fraudulence, and unnecessary middle-men. Thus setting cost efficiencies parameters for any healthcare entity to do their shopping.

    This might sound far-fetched, but these simple cost savings could greatly enhance the cost-structure viability for a small town walk-in clinic. Please don’t say that the government will be over-reaching with something as simple as this. Once again, others have mentioned similar techniques for bringing down cost, eg. what normally would cost a members co-pay, deductible…would/ could lower cost by 25%-30% of the overall procedure cost or totally eliminate said illness?

    PS. There is a growing divide in America today between National Security and Capitalism…with Entitlement Programs totally off the radar! Caution,…

  53. @Everyone – I’m sure James is well aware of the anti-trust exemption that the healthcare industry enjoys. I love the irony of the argument though, that consumer choice is the answer when clearly there’s little choice to be had. When was the last time you saw a price sheet of available services at a doctor’s office or hospital? How then can we be informed consumers?

    @Ed – Vouchercare! I like it!

  54. Anti-Trust Division….now, that’s REALLY funny. The only answer would be instilling REAL fear–long jail sentences at SUPERMAX–on criminal conduct. This rarely, if ever, happens.

    When you have such an enormous concentration of wealth, power, and mercenary army men at your beck and call, is it any wonder all of us are getting screwed at every turn?

    This illustrates what the MONEY POWERS are about:

    Good luck in getting these wars stopped, too, while we’re at.

  55. Great post but the valuable, rational thought it embodies is dust in the wind compared to the Ryan plan it repudiates. Why? Simple – marketing. Unless you can boil this analysis to some catchy phrase/s that will be easily distributed and lodged in the minds of the public, this post is utterly feckless.

  56. There is a simple catchy phrase: The best and economically most efficient and effective health system would be “MEDICARE FOR ALL – EVERYBODY IN NOBODY OUT!”

  57. This is one of the most thoughtful discussions on health care I have read. The positive endorsement of single payer is striking and encouraging. As T.R. Reid pointed out in his very thorough book comparing health care across developed nations, this will ALWAYS be a contentious topic — as it is in every country he visited. Is it the growing ignorance in the USA? Is it complicit and misleading media? Is it the total control of lobbyists? What is it that so persuades so much of the public that single payer, standardized paperwork, national cost determinations for procedures, and human compassion is so dangerous and impossible to achieve? The current model, in effect for at least 70 years, HAS FAILED! To think otherwise in view of the huge evidence in our marketplace is simple delusion, yet so many, and so many in positions of influence, delude themselves. Is it as simple as greed?

  58. @ Roy, it’s all those (factors) mentioned in your paragraph. These are all interconnected and synergistic is outcome, meaning, there is a conspiracy working to prevent more single payer coverage from taking hold here in USA.

    While it is true there is a sucker born every minute, even PT Barnum could never have envisioned just what retrograde animals the American public has become,an outgrowth of years (decades) of right wing propaganda, dispensed by media controlled by right wing corporatists and billionaires.

    It’s no wonder people like Rush Limpballs is paid such a lavish salary, for his value in keeping millions in a fog is worth it to his employers.

  59. oopps = tyop = SB “synergistic IN outcome”….this is what i get for being left-handed :)

Comments are closed.