Topic: Cato Publications

NHS: Let No Good Hospital Go Unpunished

This one’s about a month old, but still worth comment. In early August, Telegraph.co.uk reported that Britain’s National Health Service (NHS) is punishing hospitals that don’t make patients wait for care.

Since the NHS is bleeding money, the bureaucracy wants hospitals to observe minimum waiting times for non-emergency care (e.g., 122 days) as a way of limiting expenditures. Hospitals that do not impose those minimum waits – i.e., that treat each patient as soon as they can – lose funding. According to the Telegraph, “One gynæcologist said that he spent more time doing sudoku puzzles than treating patients because of the measures.” One hospital was penalized £2.4 million for eliminating their waiting lists. All this is happening while the Labor government has promised to reduce waiting times.

It’s not that the minimum-wait policy is so outrageous – given the task of the NHS. It’s that the task itself is outrageous and guaranteed to produce such perverse results. As the Telegraph editorialized:

This bizarre situation arises from the Government’s pseudo-market system, which creates conflicting objectives for “purchasers” (PCTs) and “providers” (hospitals).

In a real competitive market, increased demand can allow prices to rise, thus increasing profits, which allow the market to grow. Efficient producers can then reduce their unit costs and their prices, and so give a better deal to the consumer. The prevailing logic is that the more customers who are served - or products that are sold - in a given period of time, the better the business does.

But PCTs have budgets that are predetermined by Whitehall spending limits, and there is no way for them to conjure extra revenue out of the air or to grow their market. As a result, the hospitals that are most successful in providing prompt treatment are running through the finite resources of their PCTs at an unacceptably rapid rate.

So the NHS is faced with a perverse outcome: hospitals providing precisely the kind of immediate access to treatment that patients want and that Government ministers profess to demand, are punished financially by another arm of the Whitehall machine. Any government that wants to reform NHS funding will have to address this conundrum that lies at the heart of a tax-funded monopoly healthcare system.

Britons are lucky that they can opt out of such a perverse system – but that’s only if, as Jacques Chaoulli observes, they are lucky enough to be able to pay twice.

Much Ado about Crisis of Abundance

The American Prospect’s Ezra Klein and Berkeley’s Brad DeLong have each weighed in on Cato’s book forum for Arnold Kling’s new health policy book, Crisis of Abundance (Cato Institute, 2006). 

Kling notes that we had invited The New York TimesPaul Krugman to speak. I was disappointed that Krugman had to decline. I would have loved to see that matchup, as I have for some time thought of Kling as The Anti-Krugman.

Now comes word that Harvard’s Greg Mankiw recommends the webcast of the book forum.

All Snark, No Substance

Brad DeLong endorses Ezra Klein’s comments (see my earlier post) about Cato’s recent forum for my book Crisis of Abundance. The event was really a health care symposium, with New York University’s Jason Furman offering comments and the Washington Post’s Sebastian Mallaby offering comments on the book.

Concerning the latter commenter, DeLong offers the following:

I challenge the classification of Sebastian Mallaby as a “professional domestic policy thinker.” It would seem to me that it would be more accurate to call him a lazy hack journamalist [sic].

Memo to Cato: putting Sebastian Mallaby on a panel as a health care “expert” gains you brownie points among the journamalists [sic] of the Washington Post. It doesn’t boost your reputation among the reality-based community.

Memo to DeLong: I’ll debate anyone of your choice. I understand that Cato tried really hard to get Krugman, and I am willing to travel to Princeton.  At least Jason Furman (or is he just another hack?) and Sebastian Mallaby were willing to engage.

The main criticism of Mallaby is that he argued against insurance coverage for wigs. Actually, if you think about it, there is much to be said for Mallaby’s point. Just because wigs go to cancer patients, and we feel sorry for cancer patients, does not mean that insurance should cover wigs. Wigs are neither necessary nor sufficient for curing cancer.

If a critic wants to “score points with the reality-based community,” I suppose he should use snark. But snark can be the refuge for someone who is having difficulty with substance.

When Generous People Stop Kidding Themselves

Over at Tapped, Ezra Klein is wrestling with my interpretation of the new estimates of poverty and health insurance coverage released yesterday by the Census Bureau. I observed that after the 1996 welfare reforms made federal cash assistance less “generous,” poverty went down. In contrast, federal health care spending grew ever more “generous,” and the number of uninsured went up. I humbly submitted that perhaps Congress should stop being so “generous” with health care.

Klein thinks that’s “crazy,” but he misfires on poverty rates:

  1. He suggests that economic growth of the late 1990s and the expansion of the Earned Income Tax Credit were responsible for the post-1996 reductions in poverty. (The EITC does not directly affect the poverty rate, but it does affect the decision to earn other income that does.) Certainly each played a part. But prior economic booms did not have as dramatic an effect on the poverty rate even when the EITC was present, and scholars like June O’Neill have estimated that welfare reform had larger effects than did the economy. Moreover, although the EITC encourages some people to work more, it reduces work overall by encouraging others – those in the phase-out range – to work less. That might lift some out of poverty, but it traps them and others on the lower rungs of the economic ladder.
  2. He notes that poverty has increased every year from 2000 to 2004. True, but he is being selective in order to avoid the larger point that poverty remains lower now than at any point in the 17 years leading up to welfare reform. (Also, FWIW, poverty dropped slightly in 2005.)
  3. He confuses the poverty rate for families (9.9 in 2005) with the overall poverty rate (12.6 percent in 2005).
  4. Finally, he notes that the family poverty rate was lower in 2005 than in 1996. Yet he somehow believes this to be evidence that federal cash assistance does not contribute to poverty.

The political Left has had a really hard time dealing with welfare reform. When Congress pared back cash assistance, the Left assumed that bad things would happen (increased poverty, starvation, etc.). Instead, good things happened. But that evidence doesn’t fit in the Left’s model. They just don’t know where to put it.

Klein is as confused about the health care side of the comparison.

  1. Klein writes: “I don’t know any health care wonks who think medical cost inflation is a product of government spending…” He should get out more. He should start by hanging out with Maryland’s Mark Duggan and Yale’s Fiona Scott Morton, who estimate that prescription drugs are 13 percent more expensive in the private sector thanks to Medicaid. He should read up on crowd-out of private health insurance, which isn’t likely to make private insurance markets any more robust. Many people think that cost-shifting from Medicaid increases the cost of private coverage. Personally, I’d call that crowd-out of another sort, but the effect is the same. Klein should read about how MIT’s Amy Finkelstein speculates that Medicare led to increased medical expenditures in the private sector as well. All of which affects insurance premiums.
  2. Klein dismisses the idea of reforming Medicaid as Congress reformed welfare – by cutting back assistance. But that’s exactly what Congress did when it cut off Medicaid for non-citizen immigrants in 1996. Do I need to tell you what the Left predicted? Do I need to tell you what actually happened? Klein should add to his reading list Harvard’s George Borjas, who found that coverage levels for non-citizen immigrants increased after they were cut from the Medicaid rolls – a result that, Borjas argues, cannot be explained by the robust economy.
  3. Finally, Klein writes that yours truly “[doesn’t] want Big Government to start pummeling the medical-industrial complex.” But as I argue elsewhere, so long as the government controls the money, the medical-industrial complex will never get the beating it deserves because producers will always have a disproportionate influence over political decisions that effect their incomes. We will not discipline the medical-industrial complex until we have patients on the side of restraining spending, and that will not happen until patients own the money that’s being spent. Libertarians would love to pummel the medical-industrial complex. It would be (marginally) easier to do so were Klein to get out of the way.

Klein’s post reminds me of the passage Charles Murray used to close his seminal work Losing Ground:

Most of us want to help. It makes us feel bad to think of neglected children and rat-infested slums, and we are happy to pay for the thought that people who are good at taking care of such things are out there. If the numbers of neglected children and the numbers of rats seem to be going up instead of down, it is understandable that we choose to focus on how much we put into the effort instead of what comes out. The tax checks we write buy us, for relatively little money and no effort at all, a quieted conscience. The more we pay, the more certain we can be that we have done our part, and it is essential that we feel that way regardless of what we accomplish…

To this extent, the barrier to radical reform of social policy is not the pain it would cause the intended beneficiaries of the present system, but the pain it would cause the donors. The real contest about the direction of social policy is not between people who want to cut budgets and people who want to help. When reforms finally do occur, they will happen not because stingy people have won, but because generous people have stopped kidding themselves.

Cato Unbound - Migrating Toward National ID?

The current Cato Unbound, Mexicans in America, is the usual provocative and wide-ranging fare.  There’s no lack of issues - or passion - in the debate about immigration.

One item in the current discussion that piques my interest - indeed, concerns me - is the formative consensus that “internal enforcement” of the immigration laws is a good idea. 

University of Texas at Austin economics professor Stephen Trejo writes:

Given that most illegal immigrants come to the United States to work, why don’t we get serious about workplace enforcement? Retail stores are able to verify in a matter of seconds consumer credit cards used to make purchases. Why couldn’t a similar system be put in place to verify the Social Security numbers of employees before they are hired? …  I suspect that we could do much more to control illegal immigration by directing technology and other enforcement resources toward the workplace rather than toward our porous southern border.

Doug Massey, co-director of the Mexican Migration Project at the Office of Population Research, Princeton University, has interesting information and ideas for reform to which he would adjoin ”a simple employment verification program required of all employers to confirm the right to work.”

It does sound simple - until you step back and realize that the simple idea they’re talking about is giving the federal government the power to approve or reject every Americans’ job application.  Does anyone think that this power, once adopted - and the technology put in place to administer it - will be limited to immigration law enforcement?

To do this, all people - not just immigrants, all people - would have to be able to prove their identity to federal standards, likely using some kind of bullet-proof identity document (even more secure than current law requires).  That will soon be in place thanks to the REAL ID Act.  Once we’re all carrying a bullet-proof identity document, do you think that its use will be limited to proof of identity for new employees?

It’s easy to see how facile acceptance of internal immigration law enforcement adds weight to arguments for expanded government control and tracking of all citizens.  There are plenty of reasons to be concerned with internal enforcement, and the national ID almost certainly required to make that possible.  Many of them are discussed in my book, Identity Crisis: How Identification is Overused and Misunderstood.

Privacy Debacle Top Ten

Wired News reporter Annalee Newitz has compiled a “top ten” list of privacy debacles

It’s easy to quibble with the results, but I was delighted to see “The Creation of the Social Security Number” at #1.  Our national identifier has used its government backing to push aside all others and enable government and corporate surveillance on a scale that would never have occurred under natural conditions.

In Identity Crisis: How Identification is Overused and Misunderstood, I discuss how the uniform identification system we’ve built around the Social Security Number is insecure for individuals, making information about them too readily available to governments, corporations, and crooks. 

The fix is nothing so ham-handed as banning uses of Social Security Numbers.  Rather, it will be necessary to remake our identification systems so that they are diverse and competitive, and thus solicitous of individuals’ interests.

New at Cato Unbound: Stephen Trejo on the Intergenerational Assimilation of Mexican Americans

How well are Mexican immigrants and their offspring assimilating?

In his contribution to this month’s discussion at Cato Unbound, University of Texas economist Stephen J. Trejo lays out the latest findings. According to Trejo:

Mexican Americans are not too far off the path of intergenerational assimilation traveled by previous waves of European immigrants. During their first few generations in the United States, Mexican-American families experience substantial economic and social mobility, and their actual progress is probably even greater than what we see in available data.

However, a slow rate of educational attainment remains a “critical problem” that may delay the full integration of Mexican Americans. But, Trejo says, the evidence suggests that Mexican Americans will eventually assimilate as fully as the once-disdained Italian Americans.