Friday, February 26, 2010

Free Markets and Healthcare

I seem to be having this recurrent conversation lately....."Government can't run healthcare, let the free market do it". To which I reply "Well, so you're saying that you want to get rid of Medicare, Medicaid, and SCHIP?" which the usual answer is "NO, just let the private market function as a free one" reply is. "you've never studied economics, have you?"..."No, why?"..."Thought so".

Free market principles DO NOT work in healthcare. It's a great news soundbite, and sounds like a great libertarian fact, John Galt would be proud, but it's simply not factual. There are any number of reasons, including the resultant distribution inequity that would result, but a large part of it is inelasticity. Market forces tend to work well when a commodity or service is elastic. That is, if prices rise by x percentage, then demand falls by an equal precentage. When there is inelasticity, that falls apart. Deflationary pressure isn't applied to prices, and they continue to rise unabated. Sound familiar?

Paul Krugman had a great opinion about this last summer.


He's right, and essentially he is talking about a resultant inequity in distribution, but he never comes out and says it exactly. In other words, the richest people would benefit from reduced prices and increased competition. The upper middle class would see some benefit, but not much, and everyone would else would suffer with decreased access, an inability to afford anything more than a throat culture, and our society would be much worse off.

But sure, the market can solve about an "invisible" hand...

I am reminded of a quote from James NOT that one, James M Buchanan, a nobel prize winning economist, who said:

“Gross misperception, especially in the minds of noneconomists, often prompts the claim that ‘the market’ (or ‘capitalism’) either works or does not work without constraints, a claim that is demonstrably unsupportable, either in analytical logic or in empirical reality.”

Thursday, February 25, 2010

Healthcare Summit....

So, it's over.

President Obama met with the Republicans today to discuss bipartisanship. Except it didn't happen. And that really wasn't the purpose of this meeting anyway. Obama has known from the outset, that obstructionsim is the republican goal, and it is their only goal.

This meeting was more about lining up moderate democrats for the reconciliation maneuver. The problem is, that there are portions of the bill that cannot pass through a reconciliation process. This will leave holes in the bill that will require future legislation.

Part of me hopes that they do it. The republicans have no real ideas regarding healthcare reform, and have no agenda, despite what they say publicly...(YES, that means you John McCain). Their only agenda is taking back seats in Congress in November, nothing else matters to them.

The Senate bill is "okay". There are a number of good provisions, and some bad ones in the bill, and you know what....that's okay. We are NEVER going to get a perfect piece of legislation, it simply ain't going to happen. What we need is a starting point, and this seems as good as any legislation to start with.

What the US public needs to know, is that reform is a process, not a destination. This is going to take YEARS to implement, and we are going to try things that aren't going to work, and things that are going to work. It needs to be built upon.

The other part of me rationalizes, that we need a complete teardown of the current delivery system. We need to hire a team of systems engineers to completely re-design it from the bottom up.

We owe it to our patients, and our future patients.

Obstructionism....and Republicans....

One of the best articles I have ever read regarding the current rather venomous climate in DC....From the article...


With these acts of legislative sabotage, Republicans tapped into a deep truth about the American people: they hate political squabbling, and they take out their anger on whoever is in charge. So when the Gingrich Republicans carried out a virtual sit-down strike during Clinton's first two years, the public mood turned nasty. By 1994, trust in government was at an all-time low, which suited the Republicans fine, since their major line of attack against Clinton's health care plan was that it would empower government. Clintoncare collapsed, Democrats lost Congress, and Republicans learned the secrets of vicious-circle politics: When the parties are polarized, it's easy to keep anything from getting done. When nothing gets done, people turn against government. When you're the party out of power and the party that reviles government, you win.

Greenspan earns dubious distinction....

The dynamite prize in economics.

Alan Greenspan, Milton Friedman, and Larry Summers, after over 18,000 votes have been awarded the dynamite prize, and have been proclaimed the economists most responsible for blowing up the global economy....

Can we now proclaim neo-classical economics dead on arrival....


Saturday, February 20, 2010

Funny photo

Okay, now this really made me laugh out loud....LOL......

Wednesday, February 17, 2010

Economic Rant.....

Paul Krugman has stated that the government stimulus was not enough. He is concerned about the possibility of a "liquidity trap", of the type that the Japanese fell into in the 90's. Their recession worsened, and lasted over a decade. He sees a lot of similarities with our current situation. Small stimuluses, just enough to avoid the brink, but not enough to turn it around. Strange that so many ignore history. Additionally, I don't think that Summers and crew have handled this well. Obama has been positive because, well, that's his job to increase consumer and investor confidence. Right now. GDP predictions for 09 were all over the place, for example, 3rd Q estimates were first at 3.5%, then revised to 2.8%, and finally revised to 2.2%. Additionally, the 3.5% estimates only represeted 0.5% of real growth once government spending was excluded. REAL GDP growth was still negative. There is no vector in the marketplace ready to really stimulate and grow the economy. Energy maybe, in 5 years or so, but the infrastructure is not there to do it currently. The excesses of spending and credit obligations of the last 30-40 years are not going to simply work their way through the system in 1-2 years.

I haven't even touched on jobs yet, but with minus GDP growth, it ain't gonna happen. Okun's Law states that you need 3% of growth in production to get a 1% growth in employment. However, this only represents a 0.5% decrease in unemployment, as the modeling suggests that at least 0.5% of that 1% is an increase in hours worked by those already employed. We're nowhere NEAR 3% yet.

I'm also stuck on the dollar because while it helps our export market, the combination of a weak dollar and prolonged low interest rates creates a real potential for severe inflation. Although right now, most economists think we will hit a deflationary period first. The IMF actually is calling for countries to raise interest rates, and to aim for a consistent 4% inflation goal. It won't help us now, but they are thinking of ways to try and prepare to deal with future events. Additionally, we import more than we export. We are a consumer nation, and while a weak dollar will help a few companies, many others who import components and pieces will only have to raise prices... and there's that pesky inflation again.

Anthem in California is raising ire..

Exhibit A....Anthem in California raises rates on 700,000 enrollees by an average of 25%, for roughly 25% of them, they will see a rise in premiums of between 33 and 39%. Even at 25%, this represents roughly 4 times medical inflation (average of 6.2% per annum over the past ten years). If you don't think that this is coming to your state soon, well, I want some of whatever you are smoking.