Monday, June 29, 2009

Nate Silver does a quick tally of what countries' GDP could add up to the 5% of total GDP predicted to be lost to global warming. He manages to get 81 countries, 43% of the world's population, into a group that could, hypothetically, be the five percent of GDP lost. He writes:
Coincidentally, or not, a lot of these countries are located in the tropics, where global warming would probably have its most pernicious effects. True, they would probably not be entirely eradicated even under some of the worst-case, fattest-tail climate change assumptions.

I'm not exactly sure what mechanism Jim Manzi had in mind for the mechanism of GDP decline, but I'm not exactly sure I also don't suspect that I'd find the tropics to be most effected in terms of GDP. In terms of total damage, or lives lost, perhaps.

Given that the solution to global warming in general is increased sustainability (broadly speaking, of course), and that energy sustainability will have not only the environmental effects but the infrastructure effects, failure to implement such sustainability measures will have an even greater effect on GDP on those places where fossil fuel energy is used most, in the most industrialized nations, not the bottom-rung-of-GDP nations that Nate selected. But, then again, maybe Manzi ignored these effects entirely.

Krugman's Comment

on the subject of Mankiw's article:
the standard competitive market model just doesn’t work for health care: adverse selection and moral hazard are so central to the enterprise that nobody, nobody expects free-market principles to be enough.

Update: Mankiw responds to Paul.

This is moreso a testament to Greg's civility in these issues. Paul Krugman is, however, justifiably bitter after being called all kinds of nasty things through the previous administration's tenure. Hence, however, my choice to highlight the meat of Paul's response rather than the insults.

Saturday, June 27, 2009

Mankiw's Sunday Article on the Public Option

It's probably clear that I give Greg Mankiw a decent amount of respect as a conservative economist. Usually his positions are stated by revealing the observed mathematical relationships and then explaining why he would value a particular outcome, less than letting a bias guide his interpretation of the numbers.

Thus, I'm actually kind of suprised how unimpressed I am with his Sunday article on the public option, and also surprised with to how much I've already responded.

A few comments, for example:
True, Medicare’s administrative costs are low, but it is easy to keep those costs contained when a system merely writes checks without expending the resources to control wasteful medical spending.
"Expending the resources to control wasteful spending" is a positive way to restate the stories we've all heard of insurance companies dropping coverage on a patient once the patient finally needs it for say, an injury or a cancer diagnosis.
Similarly, a monopsony — a buyer without competitors — can reduce the price it pays below the competitive level by reducing the quantity it demands. This lesson applies directly to the market for health care. If the government has a dominant role in buying the services of doctors and other health care providers, it can force prices down.
It is my hope that a publicly run insurance option would intend to cover everyone (say, through a mandate with subsidies) and that the whole point of having this option is such that it doesn't have a say in how much it demands, and it's demand would merely represent the demand of all the people covered under it.
It is no wonder that the American Medical Association opposes the public option.
Most recently I've heard that the AMA counts about 30% of doctors among its numbers.

That's about all that's new in there, as near as I can tell.

Unrelatedly, it's worth reading Dan Froomkin's last article with the Washington Post, summarizing his 5-year career as a columnist.

Thursday, June 25, 2009

Keeping Costs Down (And Going Out On A Few Limbs)

The President says of a public option:
Why would it drive private insurance out of business? 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.

And Nate Silver agrees. Robert Reich has his own explanation of why that's bunk.

It strikes me as silly circular argument. Michael Steele says that if the problem is prices, lets just "do the deal" and cut prices. Then George Will says that you can't have competition from a public insurer, because insurance companies will be forced to cut profits and lower prices!

Incidentally, in Nate Silver's post, as well as Greg Mankiw's, a lot of other ideas for keeping health care costs down are discussed. For example, does subsidizing health insurance (sort of a back door subsidy through making it income-tax-free (see Nate's)) benefit the wallet of the consumer/patient or the insurance company? Given that the market for health care is one with low elasticity of demand (people perceive it as a necessity, required whatever the cost), it may be mostly to the benefit of the insurance company. Or as David Brooks comments:
The exemption is a giant subsidy to the affluent. It drives up health care costs by encouraging luxurious plans and by separating people from the consequences of their decisions. Furthermore, repealing the exemption could raise hundreds of billions of dollars, which could be used to expand coverage to the uninsured.

Professor Mankiw writes about the disparity between American doctors' income and those of other countries with universal health coverage. The typical argument that tends to follow here might be that the doctors in the US are far more talented, and if we were to do something that could effect their incomes, we might not be able to attract such talented doctors.

I'm not quite sure I can sympathize with this sentiment. Does this higher income indicate a greater degree of talent or education? Typically, licensure in the US requires education at a medical establishment in the US, and though the US educational establishment is well-sought internationally, it is likely to be because of the income one is able to earn with a practice in the US. International comparisons on tests of hard knowledge have been of late tending to favor the products of a European education.

So what else could produce such a higher income? As Mankiw discusses, education of doctors in the U.S. is usually something that is built into the price of an insurance premium, because a Doctor will usually take a loan to fund medical school and repay it while in practice (thus, this educational cost is actually education + interest), while in some European nations, medical education might be publicly funded (still coming from the same people, taxpayer/patients, but in this case under a different heading). This will make reported incomes higher in the U.S. while a lot of that price is actually repaying for education.

Another easy explanation: too few doctors. This is something that is regulated by the admission departments of American centers of medical education. These organizations have the incentive to appease the AMA to stay accredited, which has the incentive to keep class sizes small to keep their incomes up. Part of a solution could be to offer schools an incentive to increase their class sizes (aside from merely the additional tuition).

The issue Mankiw brings up regarding doctor training is an important distinction to consider in discussing healthcare costs, but it could also provide a solution. The difference here is timing (which may not be an issue: the government will also have to pay interest if they need to go into debt to fund any of these proposals) and incentives. A person considering medical school might be more swayed by the idea of a free education followed by a lower income later. At least I would be.

Tuesday, June 23, 2009

Michael Steele Incomprehensively Discusses Health Care.

What the hell. At least there are some people (even on both sides of the aisle!) who are actually suggesting ideas, imperfect or impractical.

As opposed to any systemic change in the health care system, Michael Steele suggests:
If I don't have access because of... a host of reasons which may be legitimate, then address that.

If he is including "systemic and pervasive reasons that for-profit insurance companies would work to deny access to its policyholders" among the "host of reasons which may be legitimate," then a systemic reform of the medical insurance industry is an entirely appropriate response.

Never mind that. Let's just do the deal, whatever that means.

Monday, June 22, 2009

A Little Bit on H.R. 2454 (Waxman's Cap'N'Trade)

I get a little disconcerted when "prevention" in health care is discussed in terms of more medication rather than lifestyle and environmental changes.

Incidentally, today is the 40-year anniversary of my hometown's flammable water catastrophe (which, in addition to becoming "a galvanizing symbol for the environmental movement," inspired a pretty okay beverage as well).

Likewise, I get a little disconcerted when environmental change is discussed as an overall cost to society as Paul Krugman does here. Granted, his point is that the overall cost is very low (18 cents a day), according to the CBO report:

CBO estimates that the price of an allowance, which would permit one ton of GHG emissions measured in CO2 equivalents, in 2020 would be $28. H.R. 2454 would require the federal government to sell a portion of the allowances and distribute the remainder to specified entities at no cost. The portions of allowances that were sold and distributed for free would vary from year to year. This analysis focuses on the year 2020, when 17 percent of the allowances would be sold by the government and the remaining 83 percent would be given away.

Emphasis mine. This bill is apparently 17% environmental solution and 83% corporate welfare.

The CBO's report states that "reducing emissions to the level required by the cap would be accomplished mainly by stemming demand for carbon-based energy by increasing its price." The effect is going to be drastically reduced if the price is raised only for 17% of polluters.

So why am I arguing that we should raise the price of polluting when I began with the idea that we shouldn't focus on the cost? Because the money raised through auctioning allowances doesn't just disappear when it enters the federal treasury (technically speaking, of course. We can certainly come up with a lot of, say, symbolic reasons to argue that the money has disappeared). The money can offset existing income taxes (to the benefit of those in lower incomes who might have undue strain placed unto them with higher energy costs – though maintaining a better set of incentives to conserve energy) or fund something like health care to take care of those who accidentally fell in the cuyahoga river back before we charged polluters.

Jefferey J. Smith relates the two:

To bring down costs even more, let’s clean up the environment, which would stop stressing out our immune systems, and let’s expand leisure for everyone, which would stop stressing out us. We can reach both goals via geonomics. That is, when we require members of society to pay land dues, they tend to use land efficiently and not pollute. And when we endow members of society with shares of recovered “rents”, then we all can afford to work less. With geonomics in place, we might not need any socialized medical attention at all.

His ending conclusion is more optimistic than I might suggest, but the point remains that the benefits aren't discussed nearly as much as the costs.

Also from the CBO study, on the subject of undiscussed benefits:

This analysis does not address other provisions of the bill, nor does it encompass the potential benefits associated with any changes in the climate that would be avoided as a result of the legislation...

For the remaining portion of the net cost, households in the lowest income quintile would see an average net benefit of about $40 in 2020.

Friday, June 19, 2009

Health Care v. Health Insurance.

Gary Becker writes recently about arguments used to disparage the U.S. health care system:

Instead, the American system has sometimes been found wanting simply because life expectancies in the United States are at best no better than those in France, Sweden, Japan, Germany, and other countries that spend considerably less on health care, both absolutely and relative to their GDPs.

...Although such calculations show that improvements in life expectancy are worth a lot to most people, national differences in life expectancies are a highly imperfect indicator of the effectiveness of health delivery systems. For example, life styles are important contributors to health, and the US fares poorly on many life style indicators, such as incidence of overweight and obese men, women, and teenagers. To get around such problems, some analysts compare not life expectancies but survival rates from different diseases. The US health system tends to look pretty good on these comparisons.

His point is certainly valid, but why should the U.S. faring more poorly on life style indicators be ignored? Is this something that is completely inaccessible by health care policy?

As the nearly clichéd argument goes, if health care is a for-profit business as it is in the United States, health care providers have an incentive not to keep people healthy, but to allow them to be sick and then treat them.

Put another way: Pfizer has just as much an interest in keeping agricultural subsidies as does a company like Cargill, and just because it's managed by a different department in the federal government doesn't mean it's unrelated to the United States' deficient health. If the connection is unclear, the particular hypothetical I'm picturing is one in which, say, the "burden"* of the corn subsidy goes directly to a conglomerate like Cargill, while foods featuring corn by-products (i.e., it's infamous fructose-enfused syrup), which are now able to undercut more-whole foods, give consumers the incentive to eat themselves into obesity and treat themselves with Pfizer-produced pharmaceuticals.

Elimination of a corn subsidy (to continue with such an example) would not only appease deficit hawks, but also correct incentives in the grocery store to encourage a healthier population. And in addition to perfectly conservative reasons why we might want a public option for health care, perhaps even a tax on overly-produced-and-thus-kind-of-fake foods might be in order to help the U.S. with it's "life style indicators."

This tax could even be a carbon tax; though there are certainly exceptions, the more energy that goes into producing your food, the greater it's association tends be with chronic diseases later in life. The system of fossil fuel to make fertilizer to grow corn to feed cows to raise and produce red meat could possibly be the least efficient energy-to-food calorie ratio available in a grocery store, for example.

* Just as the elasticities effect who gets the burden of a tax applied to that market, so would the same effect who gets the benefit of a subsidy, though this is discussed less often.

I didn't realize Becker's post would stir up as much blogger-ire as it did, but Paul Krugman and Andrew Gelman of 538 both have retorts to Becker's point (as also quoted by Greg Mankiw).