All Some Politics Is Local National

I don't get this:

A nice tidbit from the Washington Post/KFF/Harvard poll of MA special election voters (pdf):

As you may know, Massachusetts has a law that is aimed at assuring that virtually all Massachusetts residents have health insurance. Given what you know about it, in general, do you support or oppose the Massachusetts Universal Health Insurance Law?

Among Brown voters, 51% support this law and 44% oppose it.

What's the point? Brown's opponent had an identical view on the issue, and he wasn't running for MA Senate; he was running for US Senate. A state program on which they agreed wasn't what separated them in a race for a national seat.

What separated them was that Brown pledged to oppose national universal health care plans while Coakley pledged to support them. It's a pretty safe assumption that all of the 44% opposed to the MA plan would also be opposed to a similar national plan, and that some of the 51% who support a MA might also be opposed to a similar national plan (if, e.g., they are concerned about rising national deficits, or an increased tax burden on a relatively affluent state, or any number of other concerns). All he needed was 3 of those 51% to swing the election to his side. It's not at all surprising to me that he was able to find them.

Given that, it's no surprise that big chunk of Brown's voters would disagree with his views on a local issue over which he has no discretion, but support him on a national issue in which immediately becomes a pivotal vote.

DeLong linked to this as if it meant something. So... does it mean something? I can't see how. What am I missing?

UPDATE: Brown's voters were overwhelmingly against a national health care reform plan.

Making Transparency More Transparent

I agree with all of this, but Klein misses the most important fact: wages are taxed, employer-provided health coverage is not. That seems like a pretty important distinction to me, since the marginal tax rate for most Americans is 40%. If average health benefits equal $13,500 in extra compensation as Klein says, the typical worker saves 40% of that, or $5,400 a year, by receiving it in the form of health coverage rather than cash.

I don't think that's the way it should be, but that's the way it is. I agree with Klein's calls for transparency, but that points in both directions. By not admitting that fact, Klein has done his readers a disservice.

Why Does Krugman Have to Keep Doing This?

Arg:

Health care reform hangs in the balance. Its fate rests with a handful of “centrist” senators — senators who claim to be mainly worried about whether the proposed legislation is fiscally responsible. ...

But if they’re really concerned with fiscal responsibility, they shouldn’t be worried about what would happen if health reform passes. They should, instead, be worried about what would happen if it doesn’t pass. For America can’t get control of its budget without controlling health care costs — and this is our last, best chance to deal with these costs in a rational way. ...

You might think, given this picture, that extending coverage to those who would otherwise be uninsured would exacerbate the problem. But you’d be wrong, for two reasons.

First, the uninsured in America are, on average, relatively young and healthy; covering them wouldn’t raise overall health care costs very much.

Second, the proposed health care reform links the expansion of coverage to serious cost-control measures for Medicare. Think of it as a grand bargain: coverage for (almost) everyone, tied to an effort to ensure that health care dollars are well spent.

I really feel kind of silly posting this, because Krugman has just committed such a simple logical fallacy that it shouldn't even have to be pointed out. But one of my favorite quotes comes from Orwell: "We have now sunk to a depth where the restatement of the obvious is the first duty of intelligent men." I am not so stupid as to compare my intelligence to Krugman's, at least the Old Krugman, but in the interest of restating the obvious, here's what Krugman is saying:

1. We need to cut costs.

2. We should add some costs, but they won't be too big.

3. Then we should cut other costs, and the new savings will be bigger than the new costs. Honestly. Smart people who know nothing about politics say so.

What's the problem with this? Well, even if you believe #3 is feasible, and even if you believe that it is politically possible to cut Medicare by even one cent and live to tell the tale, there is NO REASON why enactment of #3 depends on the enactment of #2. In other words, if we can cut Medicare costs without sacrificing quality of care then we should do it. Absolutely. Yesterday. But that has absolutely nothing to do with whether we should then turn around and give those savings back to "relatively healthy" people rather than, say, balancing the budget. The case for #2 has nothing at all to do with the case for #3, and it directly contradicts #1.

The rational response to this sort of argument is to say "Yeah? Prove it. Cut Medicare costs without sacrificing coverage or quality of care first, build up a trust fund for this new expanded coverage with the savings (and without any other sources of funding), and if the balance of the fund is positive in say 2015 then we'll spend it on covering the 'relatively healthy' people who don't currently have insurance."

Think Krugman would take that deal? Of course not. Because he knows, as I know, that cuts to Medicare are politically impossible. And he knows, as I know, that magical mystery health care savings have a tendency to not materialize. And he knows, as I know, that universal health care is impossible without increases in taxes even if generating some savings from Medicare reform were possible. And he knows, as I know, that it is impossible to pay for health care reform without redistributing from "relatively healthy" people to "relatively unhealthy" people (i.e. it's not at all just a rich -> poor transfer).

Now that might be justifiable along any number of dimensions (although the median voter doesn't seem to think so, and Krugman knows that too, which is presumably why he's trying this end-around in the first place). But if it is than Krugman should make that case rather than the one that he is making, which amounts to "We all get health care and ice cream and pet unicorns and have money left over for cap-and-trade!"

He should really stop this. It's beneath him.

UPDATE: And here is Krugman complaining about good unemployment news because it will distract from what's really important: er, unemployment. What?

More on Japan's Health Care System

As the U.S. debates health care reform, I've been interested in comparative looks at other systems. A few weeks ago I wrote about Japan's health care system, which is very inexpensive and also has very good outcomes, and one way that they keep costs low: they pay doctors very little relative to the U.S. Toward the end of that post I mentioned that even with low doctor salaries demographic shifts will make it difficult for Japan to hold down expenses over the medium run. A recent WaPo article highlighted the same thing:

Half a world away from the U.S. health-care debate, Japan has a system that costs half as much and often achieves better medical outcomes than its American counterpart. It does so by banning insurance company profits, limiting doctor fees and accepting shortcomings in care that many well-insured Americans would find intolerable.

The Japanese visit a doctor nearly 14 times a year, more than four times as often as Americans. They can choose any primary care physician or specialist they want, and surveys show they are almost always seen on the day they want. All that medical care helps keep the Japanese alive longer than any other people on Earth while fostering one of the world's lowest infant mortality rates.

Health care in Japan -- a hybrid system funded by job-based insurance premiums and taxes -- is universal and mandatory, and consumes about 8 percent of the nation's gross domestic product, half as much as in the United States. Unlike in the U.S. system, no one is denied coverage because of a preexisting condition or goes bankrupt because a family member gets sick.

But many health-care economists say Japan's low-cost system is probably not sustainable without significant change. Japan already has the world's oldest population; by 2050, 40 percent will be 65 or older. The disease mix is becoming more expensive to treat, as rates of cancer, stroke and Alzheimer's disease steadily increase. Demand for medical care will triple in the next 25 years, according to a recent analysis by McKinsey & Co., a consulting firm.

If current trends hold, Japan's health care costs will be equal to the U.S.'s within a decade, and that's even if they keep doctor's salaries down. But shortages of doctors are getting worse, particularly for specialists, and average wait times are getting longer. Quality of service is declining as costs are increasing. It's not a good mix, and the Japanese system is beginning to look as unsustainable as the U.S.'s system.

The whole article is worth reading.

The Amorality of Public Goods

The other day I wrote a post trying to parse out how and why superior societal goods -- like environmentalism, universal health care, public education (esp. higher education), sustainable agriculture, labor rights -- have a high income elasticity of demand, and what that might mean for our conceptions of public morality. In other words, as societies get richer, they demand more of these things and often use moral arguments to support the cause. Indeed, moral claims seem to rise proportionately to income: poorer societies demand less of their governments and civil society than richer societies. The flip side of this occurs when societies get poorer: the morals get relaxed a bit and some compromises get made for pragmatic reasons.

Apropos of that observation comes this piece by economic historian Robert Fogel, winner of Nobel Prize, who observes that health care is a superior good:

The main factor is that the long-term income elasticity of the demand for healthcare is 1.6—for every 1 percent increase in a family’s income, the family wants to increase its expenditures on healthcare by 1.6 percent. This is not a new trend. Between 1875 and 1995, the share of family income spent on food, clothing, and shelter declined from 87 percent to just 30 percent, despite the fact that we eat more food, own more clothes, and have better and larger homes today than we had in 1875. All of this has been made possible by the growth in the productivity of traditional commodities. In the last quarter of the 19th century, it took 1,700 hours of labor to purchase the annual food supply for a family. Today it requires just 260 hours, and it is likely that by 2040, a family’s food supply will be purchased with about 160 hours of labor.

Consequently, there is no need to suppress the demand for healthcare. Expenditures on healthcare are driven by demand, which is spurred by income and by advances in biotechnology that make health interventions increasingly effective. Just as electricity and manufacturing were the industries that stimulated the growth of the rest of the economy at the beginning of the 20th century, healthcare is the growth industry of the 21st century. It is a leading sector, which means that expenditures on healthcare will pull forward a wide array of other industries including manufacturing, education, financial services, communications, and construction.

Of course there is a need to suppress the demand for health care; namely, that the government can't afford to guarantee full service to the entire populace under the present cost structure. But in strict terms Fogel is absolutely right: rising health care costs are no problem in and of themselves. Instead they signify a good thing: more people are buying more health services, which pushes prices up.

But at the same time that consumption rises, expectations of the appropriate baseline rise. A citizen of America in 1960 would be shocked and amazed at the amount of public provision of health care for the poor and elderly in 2009, and the range of options available to those who can't pay for them on their own. Now nearly everyone believes that we can and should do better; we only argue about the best mechanism for extending coverage. What has happened in the meantime? Our society has gotten much richer, and can therefore afford to spend more time and money on the provision of public goods. The acceptable floor has risen along with societal wealth.

Similarly, developing countries are almost universally less concerned about climate change than developed countries, despite the fact that most of the adverse effects from climate change will be located in the developing world. Why is that? Because they are still primarily concerned with feeding, clothing, and sheltering their citizens in the short run. Anything more abstract than that gets put on the back burner.

In other words, public concern is something of a luxury good. And that's a good thing. We should hope that as we get richer we should be more and more concerned with broad provision of public goods. But it should also give us some pause when making moral claims about public policy. For one thing, it will make it more difficult to get broad consensus if the wealth distribution is unequal (think about the problems of international coordination on issues like climate change). For another, I'm a bit uncomfortable with the idea that morality is (or should be) determined by public goods relative to wealth levels and I suspect that most others are as well. I would never judge the morality of a society by regressing its wealth on the number of public bus routes. Public policy requires pragmatism and the consideration of a wide array of public and private interests. If we reduce every policy debate to dueling accusations of immorality then we are shooting ourselves in the foot.

In a somewhat related vein, Chris Bertram and Julian Sanchez discuss Ronald Dworkin's thoughts on health care. Dworkin is a utilitarian and redistributionist, but even he argues that any public provision of insurance above a socially-accepted minimum is unjust, as are any Canada-style prohibitions on top-up coverage. Interesting stuff.

A Comparative Look at Japanese Health Care

The NY Times interviews U. of Michigan political scientist John Creighton Campbell, a comparativist who specializes on Japan and its health care system. The Japanese are some of the healthiest, longest-living people on the planet, and Campbell acknowledges upfront that this is largely due to lifestyle factors like diet and lower rates of violent crime. But they do have a very low-cost, universal health care system. How do they manage it, and what can the U.S. learn from it?

Reimbursement rates to doctors and hospitals are negotiated and set every two years. The fees are quite low, often one-third to one-half of prices in the United States. Relatively speaking, primary care is more profitable than highly specialized care, so Japanese doctors face different incentives than U.S. doctors. As a result, the Japanese are three times more likely than Americans to go to the doctor, but they receive many fewer surgical operations.

Slashing the pay of doctors is not feasible in the current U.S. political climate, but that's a large reason why we'll always have significantly higher costs than France, the U.K., and Japan. Even if we could control costs by limiting doctors' pay, it may not be desirable. Low pay for doctors and emphasis on primary care has led to shortages:

Financial stringency and organizational rigidities have led to inadequate hospital services in some areas, particularly in emergency care, where patients in ambulances are sometimes turned away. There also are doctor shortages in some regions and specialties. Consultation times can be too short for complicated diagnoses and for psychotherapy. ...

Many of the problems are largely due to underinvestment, and the severity of the cost control has become an issue in the current election campaign.

Several Los Angeles hospitals drew plenty of ire for dumping poor patients on the streets a few years back, and they deserved all of it. But would it have been better if the patients had not been admitted in the first place? Or if there are no specialists to see them at all? I'm sure this is not widespread practice in Japan; then again, it's not widespread in Los Angeles either. Strangely, Campbell doesn't see see this as rationing:

In the 1980s, health care spending was increasing as quickly in Japan as in America, but the Japanese government learned how to influence medical care provision without rationing by manipulating how it paid for services. Annual spending growth has thus been quite low despite a rapidly aging population.

Creating a shortage of doctors by limiting their pay is most certainly rationing. Of course, in the U.S. we ration in the other direction -- if you or your insurance company can pay for it, you get it; if not, good luck -- but not for emergency care. That's pretty much the only part of the U.S. health care system with more-or-less universal access (excepting some homeless in L.A., of course). This may not be as bad as it sounds, since it's likely true that Japan needs less emergency care than the U.S. due to aforementioned lifestyle factors, but it does sound bad.

Still, Japan has a lot going for it and the problems in the system could be lessened to some extent by increased funding. This may be more difficult as the population continues to age, but right now Japan spends less per capita on health care than almost any other industrialized country. Interestingly, their system is not single-payer (except for the elderly, as in the U.S. currently): private insurance covers most people, but is strictly regulated. Health care premiums are paid for via a progressive tax. It sounds like Japan has mandates for purchasing coverage but no public option, although Campbell doesn't speak directly to those points.

In short, Japan shows one way to bend the cost curve: pay doctors less, and accept the shortages that follow. It might work well enough in a country with such healthy lifestyles, but I have a feeling that that would be a recipe for disaster in the U.S. Which is probably why you seldom hear American health care reformers citing Japan as a possible model for the U.S., despite the low costs.

Matt Rognlie Does Not Understand the Public Option

Neither do I. He says it all in one paragraph:

The adverse selection problem here is so overwhelming that there is almost certainly no price at which the government can break even. But this will only be discovered after the public plan has already swung into operation, and millions of people have signed up. What does the government do now? Throw up its hands, announce that the plan isn't solvent, and force millions of customers who have placed their trust in the public plan to join the ranks of the uninsured? Of course not. Subsidies are inevitable.

There is more at the link. Of course nearly everyone who supports a public option also supports some version of single-payer, so for them Rognlie's argument is not troublesome. (Perhaps it is not troublesome for Rognlie either; he doesn't say.) And people who oppose single-payer understand perfectly well that a public "option" is basically a Trojan horse towards that end. This is well understood by anyone who has thought about it.

(It should be instructive that Walmart is a strong proponent of the public option, since it will not only move many of their employees onto the dole, but also subsidize many more potential customers.)

But basically Matt is saying that would-be reformers cannot have it both ways: there will be large costs for any meaningful reform. If you want the reforms anyway, then you must justify the costs. If you can't/won't do that, then you need to abandon the reforms. Of course, the flipside is also true. If you are unwilling to pay the costs, you must justify why. And nonexistent "death panels" and "Stephen Hawking would be dead" arguments don't count, nor does any phrase that includes the words "Soviet Union". If you oppose reform, you need to make the case that you shouldn't have to pay for other peoples' health care. That's a case that can be made, but you can't do it by accusing gay Jews of being Nazis:



I actually disagree with Frank there. It would be much more beneficial to have that conversation with the dinner table. I mean, seriously. Barney Frank is a Nazi?!? I'm not a super-huge fan of the man, but Nazi is about the last thing I'd call him.

This Does Not Mean What You Think It Means

All of the actors in health care—from doctors to insurers to pharmaceutical companies—work in a heavily regulated, massively subsidized industry full of structural distortions. They all want to serve patients well. But they also all behave rationally in response to the economic incentives those distortions create. Accidentally, but relentlessly, America has built a health-care system with incentives that inexorably generate terrible and perverse results.

This is a paradigm-shifting argument by a non-expert. Read the whole thing, and keep in mind that this has implications beyond the United States. Another important piece:

To achieve maximum coverage at acceptable cost with acceptable quality, health care will need to become subject to the same forces that have boosted efficiency and value throughout the economy. We will need to reduce, rather than expand, the role of insurance; focus the government’s role exclusively on things that only government can do (protect the poor, cover us against true catastrophe, enforce safety standards, and ensure provider competition); overcome our addiction to Ponzi-scheme financing, hidden subsidies, manipulated prices, and undisclosed results; and rely more on ourselves, the consumers, as the ultimate guarantors of good service, reasonable prices, and sensible trade-offs between health-care spending and spending on all the other good things money can buy.

No politician is proposing anything like this sort of reform. Why not? Because politicians get elected by insisting that trade-offs do not exist. Of course trade-offs do exist, but you won't win a mandate by saying so. Keep that in mind as you read about the ever-shifting composition of the various health care reform bills being discussed in the Congress.

Entrepreneurship and Health Care in the OECD, part trois

John Schmitt, Senior Economist of the CEPR, left a comment on my last post on the CEPR report (which Schmitt co-authored) on entrepreneurship in the OECD and the implications for American health care reform. I would like to thank him for responding, but also address some of his specific claims. His argument, essentially, is that his speculation in the CEPR report -- that the lack of universal health insurance is a major reason why the U.S. has lower rates of small business employment -- is plausible and fits with anecdotal evidence. It certainly is plausible, as I wrote in both of my posts on the report. But it isn't the only plausible explanation, and in my first post I sketched out a few other possible causes.

Schmitt raises some issues in his comment that I'd like to discuss. First, this part:

Scott Shane (who's blog post you quote) believes, instead, that what is causing low small-business employment in the U.S. is our high per-capita income. To support his view, he notes that there is a strong negative correlation between national per-capita income and the self-employment rate.

Shane's view is also plausible, but odd. Why would we expect higher incomes to cause lower small-business employment? If people are on average richer, wouldn't they have more money to start their own small business? Wouldn't they have more money to buy the products and services of small businesses? (And, how is it that more small business, which is supposed to be making our country more prosperous is, on average, strongly correlated with being poorer?) A correlation is not an explanation, and neither Shane's post nor your's helps readers to understand why the U.S. lags.

Schmitt doesn't bother disputing the correlation, but instead tries to redirect attention by pointing out that Shane's result is counterintuitive. That may be so, but it doesn't refute the evidence. What it does do is indicate that there may be complex institutional or structural factors at play that make simplistic explanations (i.e. "the U.S. has less small business employment because it lacks universal health care") fall short no matter how intuitive they may be. For example, the regulatory environment for small businesses is much different in the U.S. than in most other OECD countries. This is independent from health care policy, but must have some effect on small business employment. So is the general business environment. National attitudes towards Big Business and preferences for mom-and-pop shops are also different in the U.S. compared to, say, France.

Further, there is no intuitive reason to think that small business owners should be richer than employees of large firms. Many small businesses struggle mightily to stay afloat even if the owners work much more than 40 hours per week and refuse to take vacations (as a former part-owner of a failed small business, and an employee of several others, I have some experience in this regard). If we don't limit our thinking to the OECD, this may be even more clear. In poor developing countries, almost everyone is self-employed as a subsistence farmer or a small-time trader. And yet they are very poor. An economist should quickly recall the efficiency gains that often come from scale, and the ability of larger firms to develop and use new technologies that enhance productivity and make them wealthier. In other words, we should not be at all surprised that poorer economies have more small business employment.

(For a quick case study, consider the differences between wine production in the U.S. and France as described in Mondovino. France's mode of production involves many small, family-run businesses; the U.S. relies more on several major corporations. Which do you think is more profitable? It's not the small businesses, which are going out of business (or selling out to a conglomerate) at ever-increasing rates. Saying this has anything at all to do with the health insurance systems in the U.S. or France is absurd.)

More from Schmitt's comment:

Fairlie, Kapur, and Gates (RAND Working Paper, November 2008) extended and updated Wellington's work. They also found that 65 year-old men (who were thus eligible for Medicare) were significantly more likely to own a business than men just a little younger (and thus not eligible for Medicare). (Fairlie, Kapur, and Gates's work was funded by the Kauffman-RAND Institute for Entrepreneurship Public Policy, hardly a source to participate in "baseless speculation motivated by partisanship.")

(Last part first: the "baseless speculation motivated by partisanship" bit was a jab at Krugman, who will seemingly say anything that reinforces his priors and disparages those who disagree with him, not the CEPR authors. I have plenty of respect for the CEPR and Dean Baker, and had no intention of casting general aspersions on their work. And I enjoyed this report a lot, although I would have preferred that they stick with the data rather than make speculative claims.)

Now, then. I do not dispute the findings of the RAND study, but I do not accept on its face that this effect is explained by the Medicare cut-off age. Why? Well, what else happens after the age of 65? For most workers, the answer is retirement. Many workers do not need to work full-time after the age of 65, but they also are not ready to stop working entirely. So what do they do? Start a part-time business like a consulting firm, or a "hobby business" to give them some enjoyable work to do a few days a week. Perhaps they purchase a summer home and rent it out when they aren't using it. Doing so pushes them into the ranks of the self-employed, but health care has nothing to do with it.

Shane notes in his post that the U.S. does not rank last in the OECD in small business employment in any category defined in the CEPR report, and all the countries below the U.S. have universal health care systems. If the driving force for low rates of entrepreneurship in the U.S. is lack of universal health care, then this fact must be explained. Schmitt may be right that neither Shane's post nor mine helps readers understand why the U.S. has lower rates of small business employment, but neither does his report for the CEPR because the data aren't clear. It's certainly possible that health care plays a major role; it's also possible that variance in regulatory structures and market pressures are the driving factors. Most likely (in my mind), it's some combination of the three.

My whole point in all of this is not to say that differences in health insurance systems have no effect on differences in rates of entrepreneurship. In fact, I've said in all three of my posts on the topic that that is a plausible explanation. But there are other plausible explanations as well, and we should seek out better evidence and more rigorous testing before accepting one hypothesis over the others. After all, isn't that what scientists do?

Entrepreneurship and Health Care in the OECD, part deux

Last week I linked to a CEPR report showing that the U.S. has one of the smallest small business sectors in the OECD. The authors of that report speculated that this may be due to the lack of universal health insurance in the U.S., and Krugman agreed with them. I acknowledged that it was possible that a lack of public health insurance had something to do with the lower small business sector, but also argued that there plenty of other possible causes as well, and it's irresponsible to assume causal links that just happen to support our priors. Well, Scott Shane of Case Western studies this stuff for a living and he came to a similar conclusion:

If you compare health care’s portion of G.D.P., as measured by the World Bank, with the self-employment rate across the 21 O.E.C.D. countries in the C.E.P.R. study, you will find that the correlation is only -0.19, which statistically speaking, cannot be considered different from zero.

I know that everyone is focused right now on the health care debate, which is great. But we can’t just say that the absence of universal health care influences the size of our small-business sector. It’s certainly possible that national differences in health care affect national differences in self-employment and small-business generation in some way.

But we have to show some evidence of those effects.

Exactly right. Further, Shane did find a different statistically significant result (p < .01): richer countries have less self-employment than poorer countries. The causal direction could run either way -- the self-employed are generally poorer than employees, or the poor have less human capital and therefore fewer opportunities to get high-paying jobs -- but either way it doesn't to appear to have anything to do with health care. Or if it does, we need more than just baseless speculations motivated by partisanship to establish the claim.

Krugman and others were (rightly) vehement in their denunciations of the "dumb cowards" at the Investor's Business Daily for playing fast-and-loose with factual claims about British health care. Perhaps Krugman should hold himself to his own standard and refrain from making causal claims without evidence.

Guess Who Wrote This

I'll bet you can't:

In return, Big Pharma isn't just supporting universal health care. It's also spending a lots of money on TV and radio advertising in support. Sunday's New York Times reports that Big Pharma has budgeted $150 million for TV ads promoting universal health insurance, starting this August (that's more money than John McCain spent on TV advertising in last year's presidential campaign), after having already spent a bundle through advocacy groups like Healthy Economies Now and Families USA.

I want universal health insurance... But I also care about democracy, and the deal between Big Pharma and the White House frankly worries me. It's bad enough when industry lobbyists extract concessions from members of Congress, which happens all the time. But when an industry gets secret concessions out of the White House in return for a promise to lend the industry's support to a key piece of legislation, we're in big trouble. That's called extortion: An industry is using its capacity to threaten or prevent legislation as a means of altering that legislation for its own benefit. And it's doing so at the highest reaches of our government, in the office of the President.

Who do you think? Some liberaltarian? Perhaps one of the anonymous writers of The Economist? One of The Atlantic's econobloggers? One of the Douthat/Salam Third Way Republicans?

Would you believe that it's Robert Reich? It is, and there is more at the link.

One of the major arguments for a government health care program is that the government can use its massive purchasing power to extract cost concessions from private firms. Obama has reiterated this point over and over, and more often couched health care reform in terms of fiscal prudence rather than social justice. That argument is losing more credibility the further along this process goes (the CBO took another bite out of that argument recently). If Obama's plan isn't revenue-neutral, then he has to decide how to pay for it. That means tax cuts or deficits, both of which he has pledged himself against. Something's gotta give.

ht: Lebron

Kenneth Arrow on Macroeconomics, Health Care, and Climate Change

Part one (about macroeconomics) is here, and part two (health care) is here. Part three (climate change) gets posted tomorrow. I liked this:

Oh, why health costs increase? The basic reason why health costs increased is that health care is a good thing! Because today there is a lot more you can do! Consider all these expenses that are diagnostic. Cat scans, X-rays, MRIs and now the proton-powered whatever-it-is. Something that is the size of a football field, cost $50 million, and has all sorts of diagnostic powers. A lot of these technologies clearly reveal things that would not be revealed otherwise. There's no question about it. Diagnostics have improved. Technology has improved. You know, sending things through your blood stream to help in operations, instead of cutting you open. It's incredible. But these things are costly. But for older people longevity is increasing by a month each year. Now, whether that creates other problems with retirement and social security is another question. But, nevertheless, preserving life is a good thing.

Arrow also argues that the erosion of "professional standards" has been a driving force in the rapid inflation of health care costs. I have not seen any evidence of this other than the observational fact that different states have different standards, and different states have different per capita health care costs. But the one does not necessarily point to the other. Do readers know of any rigorous treatments of the question?

Sentences I Liked

The way I look at it, one hundred percent of the population is going to die of something that we can't currently cure, but might in the future . . . plus the population of the rest of the world, plus every future generation. If you worry about global warming, you should worry at least as hard about medical innovation

.

Of course the reverse is also true. Much more here, though I don't agree with all of the rest.

What the U.S., China, Russia, and Turkmenistan Have in Common

They all made this silly list of the "world's worst health care systems", passed along by Ezra Klein.

Let me just point out that the U.S.'s health care system was ranked 37th in the last World Health Organization survey. For what it's worth, Russia was 130th, China was 144th, and Turkmenistan was 153rd. Putting the U.S. in the same category as these other nations as "one of the worst" is deceitful. The U.S. is in the top quintile, meaning that the U.S. has one of the best health care systems in the world. Perhaps not as good as France or Germany, but still better than the great majority of countries.

Even more, the W.H.O. rankings are biased against pay-for-care systems:

The WHO rankings are based on a constructed index of five factors. One factor is "health level," defined as a country's disability-adjusted life expectancy. Another is "health responsiveness," which includes desirable characteristics of healthcare like speed of service, protection of privacy, and quality of amenities.

Both of these are sensible indicators of health quality, but they constitute only 37.5 percent of each country's score. The other 62.5 percent encompasses factors only tenuously connected to the quality of care -- and that can actually punish a country's ranking for superior performance.

Take "Financial Fairness" (FF), worth 25 percent of the total. This factor measures inequality in how much households spend on healthcare as a percentage of their income. The greater the inequality, the worse the country's performance.

Notice that FF necessarily improves when the government shoulders more of the health spending burden, rather than relying on the private sector. To use the existing WHO rankings to justify more government involvement in healthcare is therefore to engage in circular reasoning, because the rankings are designed to favor greater government involvement. (Clinton's plan would attempt to improve the American FF score by capping insurance premiums.) ...

The other two factors, "health distribution" and "responsiveness distribution," are no better. Together worth 37.5 percent of a country's score, these factors measure inequality in health level and responsiveness. Strictly speaking, neither measures healthcare performance, because inequality is distinct from quality of care. It's entirely possible to have a healthcare system characterized by both extensive inequality and good care for everyone.

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In other words, the W.H.O. rankings are often understood to be positive rankings based on objective criteria. In truth, they reflect strong normative preferences for egalitarian systems. These may be the right normative preferences to have, but they do not actually measure the quality of care in any absolute terms. This is why the U.S. and Cuba can be essentially tied in these rankings, despite the astounding divergences in actual quality of care.

None of this is to say that U.S. system is an especially good one, or that it cannot be improved. It should be obvious to everyone that some other countries have better systems than the U.S., and that there are lessons to be learned from those countries. But the sort of "worst system in the world" hyperbole that often emerges from progressives is counter-productive, mis-leading, and intellectually dishonest. There are some things that the U.S. does well and some things it does poorly. To create a new, improved system the U.S. must recognize the good while bettering the bad.

Video Time!

A couple of really interesting bloggingheads exchanges:

Dan Drezner (Tufts University and All Politics is Global) talks with Heather Hurlburt (Executive Director of the National Security Network). Topics include climate change, Obama's trip to the G8, the Doha Round of WTO trade negotiations, and China.

Matthew Yglesias (ThinkProgress.org) talks with Megan McArdle (The Atlantic) talk about health care reform, the future of American conservatism, and the financial crisis.

Finally, James Fallows and Niall Ferguson discuss "Chimerica" and the future of the Sino-American relationship: