• Let’s try to stick to the real world when we talk about Medicaid

    (Note: Paul Krugman cites here. Tyler Cowen responds here. I respond to Cowen’s response here.)

    Tyler Cowen had a piece in the NYT this weekend on Medicaid. He doesn’t seem too thrilled with its use in the ACA’s coverage expansion.

    I have a ton of respect for him. I think he’s an excellent blogger and writer. I’m not an economist, but economists I trust think he’s a pretty talented guy in that field, too. But I have to admit that his article set me off a bit. It could be that he didn’t have space in the NYT for more nuance. Perhaps he’ll provide it on his blog. In particular, I’d love him to address some of the points below…

    I get a bit annoyed when people claim that we can’t “afford” more government intervention or, god-forbid, single-payer. That kind of statement willfully ignores the fact that every country that has MORE government intervention spends LESS.

    I get a bit annoyed by the claim that an expansion of government insurance leads to lines and waiting when lots of countries have universal access and less of a wait-time problem than we do. Moreover, almost no one makes this argument when we expand private insurance, only government.

    I get a bit annoyed by blanket claims that doctors won’t accept Medicaid. Such statements often ignore the fact that the majority of Medicaid beneficiaries are children and pregnant women. We don’t need all types of doctors to accept Medicaid patients in equal numbers. They also ignore the fact that lots of doctors won’t accept new patients with Medicare or private insurance, either.

    I get a bit annoyed when people just claim government programs are “unpopular”. Like Medicare? I don’t think so. Is there any evidence that Medicaid is unpopular? I’d like to see it. Personally, I think that the fact that (a) all 50 states have bought in over time and (b) the Supreme Court just ruled that threatening to take it away is “coercive” speaks to the opposite. Additionally, polling shows the opposite of what Tyler (and lots of others) suggest.

    I get a bit annoyed at the blanket acceptance of the awesomeness of the free market in health care, when there is no phenomenal evidence of its success. And again, those countries with less free market are cheaper, universal, and often just as good. So why are we always trying to run away from them?

    Look, I get that people may not like the political implications of those systems. They may not like the governments that produce them. They may not like the lack of choice inherent in such systems. They may not like the potential  limitations within them for making money, and therefore for innovation. But we need to stop making stuff up about them.


    • Well put. I would add that the blanket statements about catastrophic coverage is, in your words, annoying as well. An argument that just throws catastrophic coverage into part of the solution without detailing the implications for various sub-populations (particularly the sick and poor) is not a well-supported argument. In his defense, this would require a lot more space than what he was probably given, but still, he needs to explain how widespread catastrophic coverage is good for population health.

      • The reason to favor catastrophic coverage is that coverage of routine medical treatment through insurance means routine medical coverage cost will be included in insurance cost. There is no cost saving or risk distribution in insuring routine care. What you end up doing is paying extra for the insurance company to process paper work, determine what is and is not covered. Routine coverage also ends up being a source of profit, so actually costs more than if you paid yourself.

        The problem of the poor and the elderly has a solution. Medicaid and Medicare. Those aren’t the only possible solutions, but they are public programs, and that’s where we ought do deal with the most vulnerable.

        • Sometimes covering preventative care lowers premiums. It’s a deviation from the “place your bets” analysis of medical insurance: if your dental insurance covers twice-annual routine cleaning, you’re more likely to go, and less likely to need expensive repairs.

          It’s generally cheaper to catch the problems when they’re small, before they grow up and spawn big problems.

        • The idea of covering routine checks is that a patient who does those will likely cause fewer costs than one who doesn’t so they should be encouraged to participate in those checks. Sometimes insurances will even LOWER premiums for people who take regular checkups. It may not make sense from the definition of insurance but it’s one of those measures that make sense once you factor in how humans behave. It’s hard enough to make people actually take these checkups even without adding an economic incentive to avoid/reduce them.

          Think of it as a membership fee.

        • Your assumption concerning “routine coverage” is in error if the term includes preventative care and monitoring. When those services are utilized, health care costs go DOWN, since expensive illnesses are prevented or caught at a stage in which treatment is easier and less costly. Further, preventive care and monitoring reduce the prevalence of communicable disease in the general population. Any Public Health student knows these assertions to be empirically proven.

        • While this argument is a plausible-sounding one, it has been the case for the last 40 years that programs designed to help only the poor are the first thing to get cut when someone discovers a new urgent budget problem. And it’s not because they are particularly unpopular with the people, but because they are particularly unpopular with a certain segment of politicians — one with a lot of money to propagandize the public into believing that they are bad, wasteful programs.

          In addition, you probably have a different idea of what qualifies as ‘the poor’ than Medicaid does: in order for people to reliably visit the doctor when they got sick but before they were catastrophically ill, even if we (say) cut the cost in half due to the magic ‘efficiency of the market’ wand, you’d have to expand Medicaid up at least to the median income (and that would have to be a local median since some markets have much more expensive health care than others.) If you look at the actual numbers, you otherwise have a lot of people who really can’t afford to shell out $400 for an office visit, a rare-earth x-ray, and some blood tests on the off chance that that cough that just won’t go away is something serious, but who make far more than even the expanded cut-off for Medicaid. If you’re not willing to say ‘well, if they can’t manage their money well enough to be able to afford it then they should just die’ then you don’t have a lot of choice. (In a country that intentionally does not provide any kind of financial instruction to the vast majority of its citizens, imposing the death penalty for financial incompetence (or sheer bad luck) seems remarkably harsh.)

          And if you’re going to cover (well over) half of the population, you might as well just say the hell with it and cover everyone.

    • The joy of current economics and many other fields is that evidence doesn’t really enter into the discussion.

      • That’s the advantage of “everybody knows” arguments – when everybody knows something, it needs no support. My experience is that something “everybody knows” is usually completely wrong, but that’s another matter.

        • I’m immediately suspicious when the best argument for anything is “it’s a proven fact” or “everybody knows.”

    • People who argue that we shouldn’t expand coverage because people will be forced to wait longer are putting the convenience of people with insurance over the health of people without insurance.

      • This seems to be the major division between the priorities of the left and right (I know the left/right distinction is oversimplifying here, but bear with me) with regard to health reform.

        The right seems focused on making insurance less expensive for healthy people (via HSA’s) and ensuring that the healthy and insured are able to access care (by opposing extensions of Medicaid and other coverage).

        The left is more concerned with making insurance less expensive for the poor and sick (Medicaid expansion, etc) and more accessible, even if this potentially may lead to premium increases or increased wait times for healthier people.

        While I have my own biases here, these are both important priorities. Both sides seem to view this as a zero-sum game, whereby helping one group by necessity comes at the expense of the other (and in practice, some proposals may do just that). I’m not sure how to square this circle, but there have to be ways to lower costs without adversely affecting either patient population (though that might come at the expense of insurers, providers, and pharmaceutical companies).

        • If we change the system for R&D for pharmaceuticals, where the reward is a government-sanctioned monopoly (patent), and we stop protecting the salaries of physicians and healthcare workers via artificial scarcity (did NAFTA open up the borders to heath trade? No.), and we remove private sector administration fees, then we can get healthcare that is more affordable for all and accessible to all. The people who still want to pay out of pocket or through private insurers will still be free to do so, and at a much better rate thanks to these innovations being implemented for public health.

          • OK, we’ve been here before, but increasing the supply of doctors drives health care costs UP, not down. Doctors (and hospitals) are very good at finding enough work to do. This has been studied often, particularly in the Dartmouth Atlas data.

            Not only are costs higher, but outcomes are often worse.

            As Aaron said in the main part of this post, there is absolutely no evidence, aside from cosmetic procedures, that health care responds appropriately to routine market forces. Adam Smith tells us why: severe asymmetry of information in markets leads to market failure, and there is no area of modern commerce where information asymmetry is worse.

            • “Adam Smith tells us why: severe asymmetry of information in markets leads to market failure, and there is no area of modern commerce where information asymmetry is worse.”

              You should give more credit to Joseph Stlglitz for this.

            • “You should give more credit to Joseph Stlglitz for this.”

              … and certainly Kenneth Arrow as well. However, back in the 18th century when he was busy being the father of modern economics it was Adam Smith who first made the point that for the famous Invisible Hand to work all parties in a market had to have relatively the same information.

    • Hey, fantastic. I recently met a lawyer who starts out her class with an assignment to go online and make a recommendation based on quality and cost to purchase a wide screen tv. Easy. Next, the students are told to go out and find a pediatric neurologist on the same basis. Forget it, it’s impossible. There are lots of reasons for this, and plenty of blame to go around. But a key tenet of capitalism is that markets function when there is transparency and symmetric information between buyers and sellers. That is not the case here, and it never will be. So markets fail and there is a role for government. This is non-controversial everywhere in the world except in the Republican Congress, and for four radical Supreme Court judges. Guess what Justice Scalia, you’re not smarter than the rest of humanity, you’re a laughing stock.

    • Austin: I’m curious as to whether the United States could copy whatever the NHS does entirely. Besides the obvious short-term economic implications for a number of interested groups (putting insurers out of business; nationalizing most health care; drop in drug prices), what are the practical reasons this wouldn’t work?

      It seems like we could nationalize care, pay half as much per person for about the same quality of care, and basically solve the long-run budget problem. I get that this is politically impossible for many reasons, but it’s the closest thing to free money that there is when it comes to raising revenue or decreasing spending. There’s no solution to meet the budget gap that’s less politically impossible, as far as I can tell.

      • It’s Aaron’s post.

        There’s no practical reason why we couldn’t do this or any number of other things. There are legitimate (and bogus) arguments for and against. And then there are the political issues.

        All in all, I would not argue that it is either the right or wrong thing to do. It depends on one’s goals. However, it would not surprise me if we end up there, but not soon.

        • Wups — thanks.

          I’m mostly curious why there are more calls for privatization than nationalization when the costs and benefits of the latter are plainly observable in many other countries. It seems that even people who would support nationalization from a rational standpoint don’t advocate it because of the political difficulty. Shifting public health benefits for poor children to only provide catastrophic benefits seems more politically toxic in a fundamental way than having doctors and nurses get paid by the government. Many workers in the health industry would be worse off in Paul Ryan’s future of lowering health spending by arbitrarily capping its growth rather than by actually changing how we provide and purchase healthcare.

          What’s politically possible changes quite quickly. Social Security privatization was a plank in George Bush’s 2000 campaign; it’s toxic today. Gay marriage has gone in the other direction. A concerted partisan effort has shifted publican opinion by tens of points on CO2 caps. If people knew that folks pay half as much for the same care throughout the world, you’d see a similar shift and appeals to ignorance with respect to waiting times, breast-cancer drugs in the UK, etc would face more skepticism.

          • Over the past 10 years, healthcare costs have grown at a continuous compounding rate of about 7%, but the median salary has stagnated at about 0% for the past 10 year. Drug patents, overpaid doctors, and excessive administration fees are pushing the growth of costs. Without reconfiguring the system governance, there will be no change, as the wealthy (doctors, lawyers, CEOs) don’t want to let go of a cash cow.

            Why isn’t the economy recovering? It took a massive hit to housing (the largest asset class by far) and is paying an outrageously expensive premium for healthcare that is declining in quality. Inaction will lead to a societal reflection on the efficiency of capitalism, so those capitalists better start (re)thinking their position through, they have the most to lose here.

          • Zach said: “I’m mostly curious why there are more calls for privatization than nationalization when the costs and benefits of the latter are plainly observable in many other countries.

            The right seems to have an endless capacity for denying what’s in front of their eyes. Whether it’s out of habit, or ideological blindness, or baldface cynical calculation, they will call for exactly the opposite of what the facts and evidence show, just to thwart anything that smacks of progressiveness and to prevent any action by the president.

            I’m not really curious any more–more like furious.

        • I think the main reason that US health care reformers have not chosen to focus on a true socialized system like the NHS (or the US VA) is the existence of a huge and very valuable health care infrastructure in the US owned by private organizations ranging from private non-profits to for profit organizations, many of which carry extensive financing by bond issues.

          The cost and other issues of converting that infrastructure to a government owned system would be very large and very complicated. Consequently reformers tend to focus on Dutch-German-Swiss style social insurance systems (the ACA is an embryonal form of that) or on Canadian-Taiwanese style single payer insurance systems.

          The politics of such a change would be a huge issue as well, since it would truly be socialized medicine.

          That said, with the exception of Japan the NHS is probably the least expensive system going, and offers excellent care which most British citizens, including the current very conservative government and even the very very conservative Thatcher government remain committed to.

          • Since you mention Japan, I’ll chip in with my usual “Japan is wonderful” comment. The two big deals here are draconian rules on what doctors must/may provide and how much they may charge to insured patients (i.e. everyone), and that for people who don’t have insurance through work, there’s a government-run system (that you are legally required to join) where the premiums are calculated as a progressive income tax, so everyone can afford it. So, basically, it’s Medicare for All with tax-subsidized premiums.

            Except for doctors only making a tiny fraction of what docs make in the US, it works wonderfully. It just works.

            So in some sense, there’s nothing to learn: we (I’m a US citizen) are already doing that. Just not for everyone. But it’s amazing how well it works. The local teaching hospital did a full factory refurb job on my right eye (fixing a detached retina). After 5 days (yes, they keep patients too long here) I was charged US$2500 or so. And they refunded half of that 3 months later (there’s a maximum patient cost per disaease per month).

    • Well said, I have never been able to sum up these points very well. Two points, there was a recent article regarding economic benefits of expanding medicaid–i.e. its ability to provide a type of economic stimulus which in a rational world would be welcomed, and two the rule to remember when trying to understand health care is NOT a typical commodity. Whenever you try to try it like it is, you always run into problems.

    • Maybe someone can explain to me how a “free market” health insurance system can operate to the benefit of any society without a significant number of people being left out. A Healthcare company is a corporation that needs to make a profit in order to survive. To do so it has to take in more revenue than it pays out. So Healthcare companies hire tens of thousands of people and pay these employees hundreds of millions to figure out how to deny coverage to their customers. Medicare, (socialized medicine) is far less expensive to administer because it has a simple eligibility requirement: you need to be 65 years old..that’s it. How can you provide healthcare services effectively to everyone if one of your primary aims is to deny coverage to people paying you premiums for coverage? Sounds insane to me. I’ve been on Medicare for eight years and it works very well for me…far better than my private insurance company ever did. Seems to me that Medicare for all would be the way to go in this country.

      • My 81 year old father always is amazed at how poor my “flagship” health insurance, provided by my employer, is compared to his Medicare. He says the same thing, that Medicare is run more cost effectively than his private care ever was, plus he gets better service AND they do what is necessary instead of trying to cut costs by denying care (instead of paying administrators and physicians less).

    • “They may not like the potential limitations within them for making money, and therefore for innovation.”

      This is the ONLY worry I have. I’m concerned that other countries are freeloading off the innovations allowed by our messy and wasteful for profit system. I’m also worried that restructuring of providers (RNs, Physicians etc) might be harder under single payer. Are there any resources you recommend on this topic?

      • Dean Baker has written a good treatment of this topic. It’s at CEPR, and googles readily.

      • As a physician, I am always startled by the realization that most Americans seem to think that most innovations in health care come from the US, and that other countries have simply borrowed from us. This is patently untrue. While the US has been responsible for many innovations, other countries — certainly including those with socialized, social insurance, or single payer health care systems and much lower cost of health care (basically everyone but us) — have contributed their share as well. Some, like Sweden, more than their share based on population size and size of GDP. Given its size, GDP, and health care spending, the US actually lags slightly in innovation.

        Here is a short and very incomplete list (I apologize in advance to anyone or any nation that is slighted):

        Britain: CT scanner, MR scanner.
        Sweden: modern angiography, modern breast radiography technique, modern approaches to avoiding surgery by medical management of coronary artery disease, treatment of arterial disease by stents, core needle biopsy for cancer diagnosis.
        The Netherlands: needle localization for minimizing extent of breast cancer surgery.
        Japan: the modern endoscope and laparoscope and the use of them for treatment as well as diagnosis, CT and ultrasound guided fine needle biopsy.
        Switzerland: early innovations in minimally invasive treatment of abdominal disease, innovations in operative repair of fractures.
        France: the modern mammogram machine.
        Germany: the modern helical CT scanner and many of its applications.

        This is not to mention the numerous drugs invented and perfected by the huge Swiss-German-Swedish pharmaceutical industry.

    • Very nice of you to try to be respectful for Tyler Cowen when he puts on full display the standard Republican tropes against Medicaid expansion. But the fact that it’s riddled with falsity deserves some condemnation. This isn’t a mistake; it is part of the conservative hive-mind’s efforts to spread disinformation. At best, it is sloppy journalism that did no research whatsoever.

    • There’s so much commentary about U.S. health care from people who seem to have all kinds of ideas about it should or might work, but obviously have very little experience with how it actually works.

      My cure for such people is: get a serious, chronic, expensive disease (stage 4 metastizing colon cancer will do) when you’re unemployable and not eligible for Medicare; try to buy an individual policy with premiums and deductibles that won’t bankrupt you; then go for treatment.

      What they’ll learn: while the treatment can be good, there’s very little co-ordination between most providers, which means duplication of services (such as having a blood test at 12:00 pm, then getting that same test 4 hours later with no treatment in between), lost results, and a level of general confusion that I never saw in private industry.
      (I hear that Taiwan uses “smart” insurance cards, so that everyone can have their medicare history always available.) They’ll also get to experience the stunning costs ($17,000+ for a CT scan) as well as the stunning increases in costs.

      Add to that the amazing incompetence of most business offices used by medical practices, resulting in double billing, lost payments, insurance claims filed when coverage is not yet in force, etc.

      To sum up: using the word “system” to talk about U.S. health care is like calling a room full of 6-year-olds on sugar highs a “system”.

      • “($17,000+ for a CT scan)”

        I may have said this before, but our CEO got it into her head that we should get head MRIs done (since we’re both turning 60 this year). Our GP gleefully signed us up in a way that insurance would cover it. Given that insurance covers 70% here in Japan, how much would you guess we were charged? If you guessed anything over US$100, you’d be wrong. (By the way, we could have gotten them done at a commercial place outside the insurance system for a tad under US$400.)

        • You are lucky that the completely unnecessary MRI did not reveal an “incidentaloma” resulting in invasive treatment and a surgical catastrophe. Sometimes care can be too cheap.

    • If these folks would just substitute ‘my biases inform me that’ for any vague references to non-existent data, their articles would be logically consistent.

      Of course, that just puts them on par with the guy at the end of the bar at the bowling alley after league night is done.

    • “They may not like the lack of choice inherent in such systems.”

      I don’t really know where this idea comes from? I happen to live in one of those countries with a single payer, universal, health care system (Finland). I’ve just recently come through two major surgeries this year. These were at public hospitals. On top of that, I spent some to get a second opinion at a private hospital. So, the public systems gives me a basic coverage and then it’s up to me if I want to spend some extra on private healthcare. I’d say I have all the choice I want to have, don’t you?

    • This is a great rebuttal to Tyler Cowen’s piece.

      I was so annoyed at Tyler Cowen’s article I sent him an email with the very same points, because there was no opportunity to comment at the end of his NYT column.

      One thing that Cowens also overlooked, not mentioned by Aaron, was the cost to the taxpayers and paying consumers, of free health care for the of the use of the emergency room and other free care given to sick patients without insurance. It seems that the governors, who are protesting the 10% of the cost to the states of the Medicaid extension, as well as Tyler Cowens, are ignoring this point.

      I am not familiar with the other work of Tyler Cowen. His NYT article doesn’t fill me with enthusiasm about his grasp of economics.

    • You expect facts from Cowen? He might be a good writer, but he’s still a Glibertarian economist. Which means that he hardly knows what the hell he is talking about. Doesn’t he teach at George Mason U.? Don’t forget, the economics department there has been taken over by the Koch suckers.

    • I get a bit annoyed when people wilfully overlook the fact that Tyler Cowen has spent his entire career working for the Kochs. These “mistakes” are not accidental – they’re propaganda. He’s a flat-out, straight-up propagandist who wilfully distorts the truth. We should not have to pretend to have a lot of “respect” for such a person.

    • People should read TR Reid’s The Healing of America for a thorough, balanced but still relatively brief and highly readable survey of countries that offer a whole range of alternatives to the one we have here in the USA. He demonstrates that there is wide range of alternatives to ours that still provide adequate and timely care while reducing administrative costs dramatically, He also cites two countries, Switzerland and Taiwan, which decided to radically change their systems when it was found that too many people in the country were not getting needed medical care. Ie, it IS possible for this to happen if/when the political and moral will is in place!

      • Indeed it is. And what does that say about America today? It says that collectively we are either lacking in morals or too flaccid to fight.

    • Just curious – who are the “economists (you) trust” that think Tyler Cowen is a good economist? I’m an economist, and the only economists I know that put Cowen on their A-list are right-leaning guys who conflate economic analysis with political ideology. Tyler Cowen writes about a broad range of topics in his blog, from restaurant reviews to discussion of current fiction. Unfortunately his economic commentary is frequently polluted by libertarian drivel that requires him to assert the existence of an alternate universe in which the facts support his positions. Just like the op-ed.

    • I get more than irritated by these flabby-spoken blogs that can’t go beyond. “A bit annoyed”.

      This is a contest between greedy swine in the health care insurance industry and the needs of people who are sick and dying.

      Yes – Greedy swine. There is no other way to accurately say it in simple words. The CEOs want US health care to cost double what it should so they can have a mansion, fancy cars, drivers, a private jet and a yacht from the millions they extract.

      That’s it. There is nothing else going on.

    • Conservatives lie.