Posts Tagged ‘health care’

Coakley Doubles Down on Stupid Comment

Saturday, January 16th, 2010

Martha Coakley, the Democrat candidate for Senate in Massachusetts, spoke on a radio show earlier this week about hospital employees who refuse to provide certain types of care (emergency contraception, abortion) because of religious objections:

Ken Pittman: Right, if you are a Catholic, and believe what the Pope teaches that any form of birth control is a sin. ah you don’t want to do that.

Martha Coakley: No we have a separation of church and state Ken, lets be clear.

Ken Pittman: In the emergency room you still have your religious freedom.

Martha Coakley: (……uh, eh…um..) The law says that people are allowed to have that. You can have religious freedom but you probably shouldn’t work in the emergency room.

The remark got a lot of negative press, and deservedly so. Separation of church and state implies that the state will not inject itself into matters of religious conscience that do not interfere with its ability to establish a secular order. Those with religious beliefs that condemn contraception should have the freedom to follow their convictions. State Senator Scott Brown, Coakley’s opponent, sponsored an amendment that would have preserved that freedom to a 2005 bill that mandated hospitals provide emergency contraception.

So in response, Coakley released this ad, which reads:

1,736 women were raped in Massachusetts in 2008.
Scott Brown wants hospitals to turn them all away.

Wanting some people to have the option to refuse to provide some kinds of care is not at all the same thing as actively wishing that all hospitals refuse all care to rape victims. Brown’s campaign just held a press conference announcing they will press charges in response to the flyer.

In this country, health care is the free exchange of a service and money between two individuals. If the doctor or nurse isn’t willing to provide a service, he or she should not be compelled to do so.

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Elections have consequences

Sunday, November 22nd, 2009

Sen. Sherrod Brown (D – OH), following the Senate’s motion to proceed with the Reid health care bill:

In the end, I don’t want four Democratic senators dictating to the other 56 of us and to the country, when the public option has this much support, that it’s not going to be in it.

Sorry, Sen. Brown, but the people of Louisiana, Arkansas, Nebraska, and Connecticut get representation in the Senate, whether you like it or not. I’m not surprised that those four senators aren’t anxious to jump on the public option bandwagon, given that opposition to the bill outnumbers support nationwide, and has for quite some time.

I have a feeling that Sens. Landrieu, Lincoln, Nelson, and Lieberman went along to get along with the Democrat leadership on the motion to proceed, but aren’t willing to risk their careers voting for something that the American people clearly don’t want.

Update:

Support for the Democrat health plan is at an all time low. Just 38% of likely voters support it.

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Should the Health Care Debate Really Be an Education Debate?

Friday, September 4th, 2009

From Robert Fogel:

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.12

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.

This increase in productivity drives the strucural deficiencies for a small part of the health care market.  Skilled workers use software to automate mundane tasks, which eliminates the need for unskilled laborers to perform those tasks. Consequently, skilled laborers see their salaries increase, while unskilled laborers are put out of a job. The rich get richer; the poor get poorer.

To compound the issue, communications technology has expanded the size of markets to included unskilled laborers who accept low wages. Companies can outsource any tasks that can’t be automated to low-wage laborers in developing countries as another means of cutting costs. So in developed countries, unskilled laborers are getting pushed from both the top and the bottom. To secure jobs, they need to develop modern technological skills or move to a country with a lower cost of living if they want to maintain their lifestyles –specifically, the amount they spend on health care. Without education, unskilled laborers will be permanently priced out of the market for health care.

So far, the health care debate has centered around solutions for the symptom of that market’s disfunctions. Instead, if we look more at the causes of the disfunctions, we will find readily apparent solutions. Rather than take money from the rich to pay for the poor’s health care or institute price controls on health care and health insurance, we should look for plans that help the poor earn enough money to afford their own health care. We should refocus our educational system to provide the poor with the tecnological skills needed in a developed economy.

This is the exact wrong attitude to have.

This is the exact wrong attitude to have.

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News of Marginal Benefit: July 24, 2009

Friday, July 24th, 2009

Here are some news stories/op-ed pieces that I found interesting from the past week:

“The Economy has Hit Bottom” by Alan Blinder (WSJ)

“Where the Jobs Really Are” by John McWhorter (CNN)

The Long-Term Budget Outlook by Douglas Elmendorf (CBO)

“Sick and Getting Sicker” by Simona Covel (WSJ)

“California’s Nightmare Will Kill Obamanomics” by Kevin Hassett (Bloomberg)

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Why We Must Not Ration Health Care (In the Conventional Sense of the Word)

Thursday, July 16th, 2009

President Obama, Speaker Pelosi, and the rest of the Democrats’ work to push a health care bill through Congress has sparked a vigorous debate across the country as to what reforms will help and hurt the nation’s health care system. I’d like to take the next couple of posts to highlight a few of the basic economic issues at stake in the debate.

Today’s post focuses on rationing. Proponents such as Princeton professor Peter Singer argue that we have to ration the amount of health care provided in order to reduce costs.  From Singer’s article in the New York Times,

You have advanced kidney cancer. It will kill you, probably in the next year or two. A drug called Sutent slows the spread of the cancer and may give you an extra six months, but at a cost of $54,000. Is a few more months worth that much?

If you can afford it, you probably would pay that much, or more, to live longer, even if your quality of life wasn’t going to be good. But suppose it’s not you with the cancer but a stranger covered by your health-insurance fund. If the insurer provides this man — and everyone else like him — with Sutent, your premiums will increase. Do you still think the drug is a good value? Suppose the treatment cost a million dollars. Would it be worth it then? Ten million? Is there any limit to how much you would want your insurer to pay for a drug that adds six months to someone’s life? If there is any point at which you say, “No, an extra six months isn’t worth that much,” then you think that health care should be rationed.

Of course, Singer is correct here; we have to ration heath care in some way.  We face scarce resources; providing health care means that we cannot practice law or make cars or watch television.  Economics is the study of how people decide between scarce resources such as health care, law, and leisure time.

But, the question to which we seek an answer through this debate is: how do we decide how to ration health care?  Here, Singer begs the question to reach his conclusion.  He assumes that we are going to publicly ration health care to show that we must publicly ration health care.  This is what politicians mean when they criticize “rationing.”

However, it stretches the conventional interpretation of  ”rationing” to apply that word to the current system, where individuals choose health care according to their own tastes and preferences instead of delegating that authority to a commission that would make such decisions. The conventional sense of the word rationing includes a notion of an impostion from an external source.  When the motive for “rationing” comes from within in the individual, it is more properly described as “self-control,” a proper virtue.

Singer’s system should make any decent, virtuous person sick to his stomach.  It dehumanizes people.  Such a system follows the Utilitarian maxim “the greatest good for the greatest number.”  It imlpies that people can be reduced to statistics of their ages, genders, and health conditions and that we can caluclate a simple number that indicates a person’s life-worth.  In fact, Singer’s article features a Soviet-style propaganda poster that states “Saving the life of one teenager is equivalent to saving the lives of ____ 85-year-olds,” daring the reader to insert his own figure as if such a comparison were both possible and meaningful.

It also assumes that there is such a thing as the public interest, as if the population where a homogenous mass where each individual had the same tastes and preferences.  It completely casts asisde any notion of the diversity that enriches American society.  The current system allows for a multiplicty of outcomes; those who can afford the best care in the world can get it, those who can afford something less can find a more economic option, and those who do not need health care and do not want health insurance can forgo the expense altogether.  The proposed Democrat system would impose one option for health care on everyone.  If you don’t like it - too bad.

No one person or group of people can manage the provision of health care to an entire nation of 300 million people.  It’s best to leave those decisions to individuals.  Let’s treat people as people and not as objects.

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Competition and Health Insurance

Saturday, June 27th, 2009

President Obama has proposed that the federal government provide health insurance directly to individuals as part of his part of plan to remake the U.S. health care system. A government insurance option, Obama argues would provide needed competition to the health insurance industry, implying that the current market exhibits a structure that allows some firms to charge more for insurance than what it costs to provide.

Economists describe a market as competitive when, in addition to other features, many firms offer the same product. Consumers want to buy the lowest-priced good. The more firms in a market, the harder it is for all of them to agree to overcharge consumers. If one firm can produce a good more cheaply than its competitors and still make a profit, then it can capture a higher share of the market and increase revenues. 1,300 firms provide health insurance in the United States. I find it hard to believe that 1,300 firms could collude to dominate a single market. Nor would a market with 1,301 firms have a substantially higher level of competitiveness than a market with 1,300 firms.

Nonetheless, President Obama defended his proposal in a press conference, arguing, “If private insurers say that the marketplace provides the best-quality health care, if they tell us that they’re offering a good deal, then why is it that the government — which they say can’t run anything — suddenly is going to drive them out of business? That’s not logical.” Obama fails to see that the government would not compete with private insurers, at least in any sense of the word as currently understood. In a competitive market, no firm has any more power to influence prices than any other. Yet because of the government’s size and legal power, it would exert a strong influence over the insurance market. It could set regulations that work in its favor, acting as both referee and player.

More importantly, where markets are competitive, the government could only offer insurance at a lower price by operating at a loss, which its private competitors could not do. If a private firm runs out of money, it must raise additional funds in either the credit or equity markets, where savers will not offer funds to firms that cannot turn a profit. If the government runs short of money it can raise funds through taxation, compelling from savers what private, unprofitable firms cannot. By operating long enough at a loss, the government will drive private firms out of the market until it is the only one left. Anti-trust law prohibits private firms from employing such predatory pricing strategies.

A government health insurance option would reduce competition in the industry, not increase it. Despite Obama’s claims to the contrary, consumers who like their current health care plans will not be able to keep them. By that phrase he means not that consumers will still be able to purchase health care from a private insurer, but simply that the government will not “[force] you to shift” your plan. But sooner or later, private firms will be driven from the market, reducing the amount and quality of health care that Americans receive.

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Is the Soda Tax the Real Thing?

Wednesday, May 13th, 2009

Next week, the Senate Finance Committee will hear arguments about proposals to cover the cost of President Obama’s $1.2 trillion health care plan, one of which is a tax on soft drinks.  Most soft contain high-fructose corn syrup, which if consumed in high quantities can contribute to obesity and diabetes.  The Congressional Budget Office estimates that a three-cent tax on a 12 oz. can would raise $24 billion over four years, or 2% of the cost of the entire health care plan.  Those who support the tax want to use it as a tool to reduce consumption, thereby reducing soft drinks’ contribution to health problems.

During the hearing, the Finance Committee should consider what purpose the proposed tax should achieve.  It can raise revenue for the government or it can reduce the consumption of soft drinks, but it cannot do both at the same time.  If consumers don’t buy soft drinks, then they don’t pay the tax.  The price elasticity of demand for soft drinks, the change in quantity consumed as a result of a change in price, will determine whether or not a tax on soft drinks can effectively raise revenue.  If the price elasticity is high, then consumers will switch to substitute drinks like diet soda or water to avoid paying the tax.  If the price elasticity is low, then most people will just pay the three-cent tax instead of reducing consumption.  Since there are plenty of substitutes (Coca-Cola and Coke Zero are about as good of an example of perfect substitutes as I can think of) and the low-income consumers who predominantly purchase soft drinks will look to stretch their budget as far as they can in the tight economy, I will bet that the elasticity of demand is high.

So if the tax will reduce consumption more than it will raise revenue, we have to ask if good public policy implies that we should limit the consumption of soft drinks.  For this to be the case, the consumption of soft drinks would need to inflict a cost on people who neither produce nor consume soft drinks, which economists call a negative externality.  It’s only fair that the people who benefit from the transaction, the consumer who enjoys the drink and the producer who receives money for making it, bear all the associated costs.  If the link between soft drinks and obesity and diabetes is clear and definite, then an excise tax to impose the increased costs of health care on soft drink producers and consumers is fair, provided that at present levels of consumption, each additional can increases the government’s cost of providing health care by about three cents. 

To me, the link between soft drinks and obesity and diabetes is tenuous at best.  Plenty of other factors contribute to the incidence of those diseases, such as exercise and genetics.  A serious effort to reduce obesity would include a government subsidy for exercise.  Or why beat around the bush with a tax on soft drinks?  Why not just tax people for being fat?  Every county can update its fat tax information at the same time it updates its property tax assessment.   This tax will reduce the cost of health care about as much as it will raise revenue – hardly, if at all.

I prefer the more direct route to make people bear the cost of health care – let them pay full price for it in a market.  Currently, almost everyone pays for health care through employer-provided insurance, which is subsidized by a code that exempts it from the income tax (don’t expect that to last for long).  For someone who has insurance, the health-care-related costs of his exercise and nutrition decisions fall on his insurance company, which economists describe as moral hazard.  President Obama’s “new era of responsibility” should make individuals, not insurance companies, responsible for their own health decisions.  The government cannot expect to effectively manage the health care decisions of more than three hundred million Americans – no human can.  Congress should decline to enact this meddling tax and others like it. 

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