Archives: 12/2008

To Stimulate the Economy, Defeat Health Care Reform

The Church of Universal Coverage is telling us that national health insurance will stimulate economic growth.

  • Senate Finance Committee chairman Max Baucus (D-MT) says universal health insurance coverage is the key to a healthy economy.
  • MIT economist Jonathan Gruber says “health care reform is good for our economy.”
  • Business Week columnist Chris Farrell writes, “Universal coverage would stimulate the economy [and] boost the financial security of ordinary Americans.”

That seems to contradict their usual spiel — which happens to be correct — that America’s health care sector is wasteful and inefficient.  Americans spend twice the amount that other advanced nations spend on medical care, yet we’re not noticeably healthier.  Researchers estimate that one third of U.S. medical spending produces nothing at all — that’s about $700 billion wasted per year.  How is pumping more money into such an inefficient economic sector supposed to stimulate growth?

It also doesn’t seem to square with the facts. If anything, the economy appears to grow faster when Congress rejects universal coverage.

  • After Congress defeated President Harry Truman’s proposal for national health insurance in 1949, the nation enjoyed four years of robust economic growth.
  • The defeat of the Clinton Health Security Act in 1994 was followed by six years of robust economic growth.
  • The largest step Congress has taken toward universal coverage was when it launched Medicare and Medicaid in 1966.  Real economic growth averaged 5.7 percent in the four years prior to 1966, but only 2.7 percent in the four years that followed.

If history is any guide, politicians who want to stimulate the economy should be trying to defeat universal coverage.

Source: Bureau of Economic Analysis

The right kind of health care reform will reap economic dividends.  Letting consumers control their health care dollars and choose their own health plan will make us healthier and wealthier by encouraging innovation, eliminating wasteful spending, and making health care more affordable.  Nationalizing health insurance, on the other hand, will suppress innovation and encourage wasteful spending, as evidenced by Medicare, Medicaid, etc.

My favorite New Yorker cartoon shows a bar patron telling his compatriot, “I figure if I don’t have that third Martini, then the terrorists win.“  People will seize on a crisis to justify, well … anything.

Are You High Enough on Barack Obama’s List of Priorities?

Today’s The USA Today tells the story of “Phyllis Smith, a 60-year-old uninsured seamstress in Yantis, Texas, [who] goes without medications for high blood pressure and diabetes because she can’t afford a visit to her doctor to get her prescriptions refilled.”  The article quotes Smith:

With the condition this world is in right now, [Barack Obama] has his hands full…. Whether I get my high-blood-pressure medicine is not going to be high on his priority list.

Sort of argues against giving some distant ruler that much control over your life, doesn’t it?

And who knows?  Were those distant rulers not doing so much to make health insurance more expensive, perhaps Smith wouldn’t be uninsured.

Were they not doing so much to make routine care so expensive, perhaps Smith could afford that doctor’s visit, or have a nurse practitioner adjust her prescription.

Were they not doing so much to make prescription drugs more expensive, perhaps Smith could better afford her medications too.

Who Says Health Care Reform Is Likely?

After so many PG-13 stories about health care reform and a new administration that everybody’s really hoping makes it happen, the press is starting to write rated-R stories about the actual chances for comprehensive reform. Today, I was quoted in a couple of the R-rated stories.

Investor’s Business Daily reports on two Congressional Budget Office reports released yesterday.  Both were launched and largely completed under the tenure of then-CBO director Peter Orszag, who has since been tapped to direct President-elect Barack Obama’s Office of Management and Budget.

Before becoming Barack Obama’s budget chief, Peter Orszag gave his future boss an indirect warning Thursday that health care reform will be neither cheap nor easy.

“(The first report) shows that many of the things that Obama and Congressional Democrats think will save costs, such as preventive care and information technology, won’t really save much money,” said Michael Cannon, director of health policy studies at the libertarian Cato Institute. “It also shows that covering the uninsured will cost a lot of money.”

Better preventive care and health IT would save Medicare $850 million and $22 billion, respectively, over 10 years. Over that time, Medicare is expected to cost $6.7 trillion….

“If you read between the lines, he’s saying that health care reform will be a blood bath, not quick and easy,” said Cannon.

The USA Today reports:

[F]or significant change to occur, health care must stay a priority for his administration and for Congress. Special interest groups whose conflicts helped derail change in 1994 must come together.

There are signs that may happen. A coalition of conservative business groups, including the National Federation of Independent Business (NFIB), has teamed with a major labor union, the Service Employees International Union, and a left-leaning advocacy group, Families USA, to push for action in the first 100 days. Key groups, including hospitals, doctors and consumer advocates, are meeting with congressional staffers for leaders such as Sen. Edward Kennedy, D-Mass., a longtime champion of overhauling health care.

The health insurance industry — whose “Harry and Louise” ads helped turn public opinion against the last attempted overhaul — says it wants change….

“In the 26 years I’ve been involved with health care, I’ve never seen such interest and cooperation in trying to get to yes” on change, says Ron Pollack, head of Families USA, which supports expanding government programs to cover all Americans….

Others aren’t sure that will be enough. Health policy consultant Robert Laszewski, a former insurance industry executive, [says,] “There is no consensus in Congress or the country on what a comprehensive health care bill would look like…. Plus we don’t have the money.”

“They all want to be at the table because they don’t want to be on the menu,” Cannon says of the interest groups.  “Sooner or later, someone is going to be on the menu. You can’t do comprehensive reform without goring someone’s ox.”

At Least We’ll Get More of the Same…

The latest issue of The Economist praises president elect Obama’s pick of Arne Duncan to lead the department of education. In particular, it predicts that “Mr Duncan may restore the spirit of co-operation that helped pass NCLB in 2001.”

But bi-partisanship is not intrinsically desirable. It is only good when it results in good policies. NCLB has not proven itself a good policy. There are four nationally representative sources of information on academic outcomes over the last 6 to 10 years: America’s own National Assessment of Educational Progress (NAEP), and the international testing programs: PISA, PIRLS, and TIMSS. NAEP shows some gains since NCLB was passed, but they are, for the most part, smaller than those that occurred in the years immediately preceding the law. TIMSS shows gains in math over the past decade, but stagnation in science, and much of the math gain seems to have preceded NCLB – and we’re still just in the middle of the pack among the top 30 rich countries despite being the second highest spender among them. Both PISA and PIRLS show stagnation or decline across subjects and grades.

These lackluster results have come at an additional cost of perhaps $100 billion over our already world-leading per-pupil spending. I don’t understand why an “economist” would think more of this kind of bipartisanship desirable.

Rosen on DHS

More on that Rosen piece in the New Republic on the Department of Homeland Security (a name we should change, by the way) that Dave Rittgers just wrote about.  As Rosen notes, a society that is rational about danger, in the sense of equal attention to risks of equal magnitude, would not have created a Department of Homeland Security (much of what the Department does, of course, has nothing to do with terrorism).

What I like about the article is that Rosen also points out that ours is not such a society. For social, psychological and bureaucratic reasons we prefer protection against some risks to others of greater danger. We demand total protection against terrorism. The Bush Administration, therefore, could not resist the creation of the Department of Homeland Security in 2003.

Leaders then face unreasonable public demands for wasteful protection from terrorism. What should they do? To me there are basically four alternatives.

1. Tell the truth and risk the political consequences. It seems likely that politicians cannot survive such honesty and will therefore rationally avoid it, but there are counterexamples.

2. Cave and spend tons of money.

3. Fake it. Ratify people’s inflated fears and then claim falsely that the programs you’ve put in place greatly reduce the danger, while holding down spending you know to be wasteful. This, Rosen argues, is basically what the Bush administration tried to do.

4. Insulate decision-makers from democracy with science. Make bureaucracies that combat dangers that people overly fear into technocratic domains. Use fancy sounding terms like risk management and analysis that appear scientific to limit public demands from protection: “We would like to give you a grant to protect your waterpark, but our risk-vulnerability algorithm says we must not.”

The solution is unclear to me. But we have a panel on these issues at the conference that Dave just mentioned. It has the catchy name “Domestic Security: Risk Management and Cost Benefit Analysis,” and includes me, Jim Lewis from CSIS, Cindy Williams from MIT, Jeremy Shapiro from Brookings, and Bruce Schneier. John Mueller, whom Rosen also cites, will also be speaking at the conference. Sign up if you’re into this stuff.

*James Fallows has written several good articles on the same topic.

Inside the Dept. of Homeland Security

Jeffrey Rosen has an article up at The New Republic criticizing the Department of Homeland Security as a bipartisan effort to be seen doing something about terrorism.  Unfortunately, that something fails any rational cost-benefit analysis:  “Both parties seem incapable of acknowledging an uncomfortable but increasingly obvious truth: that the Department of Homeland Security was a bureaucratic and philosophical mistake.”  Go read the whole thing

Rosen cites security expert Bruce Schneier on the misallocation of funds to security cameras.  These cameras proved ineffective in preventing the 7/7 bombings in London, and the capture of the bombers was due largely to good intelligence and police work, not camera systems.  New York City immediately jumped on the camera bandwagon in spite of their dubious utility in terrorism and crime prevention.  As Schneier puts it, “[t]he question isn’t whether the cameras are useful; the question is whether they’re essential–or would it be better to spend that money on the policeman on the beat?”  Check out Schneier’s blog here.

Schneier’s excellent book, Beyond Fear: Thinking Sensibly about Security in an Uncertain World, is required reading for any serious discussion about national security.  Schneier will be a panelist at Cato’s conference on national security on January 12th and 13th.  Information about the conference is available here.  This conference is part of Cato’s three-year initiative on issues relating to civil liberties and counterterrorism.