Comments on FiveThirtyEight: Politics Done Right: Wyden Not?

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2009-11-10T02:21:50.147-05:00

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2009-10-10T08:59:45.326-04:00

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F: Good post, except you forget one thing: There ...

2009-07-01T07:43:00.319-04:00

F:

Good post, except you forget one thing: There aren't enough doctors to go around. My primary doctor is in a practice with five others; they are booked solid for literally months in advance, in 15 minute increments. They are affiliated with two hospitals, but can do most of their work in their own.

My doctor charges prices beyond what insurance will pay because he can, the demand for his services is so high he can charge double what insurance will cover, and he STILL packs the waiting room and works ten hours a day.

I don't see how restricting monopsony power is going to help much. The demand for medical services, at least in the USA, is only going to grow as the baby boomers (I am one of them) age. They are 50-70 now, and entering their most medically intensive years.

One way of lowering medical costs is greater government subsidy of medical school graduates; more outright scholarships and grants so more people can become doctors. If we made that much less expensive, we'd have better competition.

No, you miss my point which I didn't make very cle...

2009-06-30T23:04:21.554-04:00

No, you miss my point which I didn't make very clearly. Why try somthing like anti trust which is not known to work in health care when they are many other solutions (see any other industrialized country) which are known to work?

Lensch, please cite the situation where antitrust ...

2009-06-30T22:57:34.242-04:00

Lensch, please cite the situation where antitrust enforcement to curtail the abuse of monopsony power by payors with respect to medical services was attempted and failed to yield results.

"What about just trying that commonsense less radi...

2009-06-30T18:56:44.628-04:00

"What about just trying that commonsense less radical remedy for a while and see if it works"

Because it has never worked before, never worked anywhere else in the world, and people die while you are waiting.

This can all be solved by the simple application o...

2009-06-30T18:48:21.499-04:00

This can all be solved by the simple application of antitrust law. The barriers to entry here are pure network effects, but are ONLY network effects if you let monopsony power (that is, power to control the price from the buy side) go unregulated so long as the Payor has it.

Payors able to use monopsony power to extract sub competitive prices from docs (that is, when a doc can be forced to decide between closing his practice and leaving the area or accepting whatever terms the Payor offers, take it or leave it) derive strong protections against entry. Entry at less than equal market share cannot be successful. Entry at equal or better market share is impossible. At most, niche penetration occurs. System repeats.

Consumers then see inflated prices as monopsony power is leveraged into monopoly power, and/or service declines. These are indeed monopoly rents. BUT they are only there because no one bothered to apply the antitrust law to the FIRST violation – the abuse of monopsony power.

This becomes even more perceptibly self perpetuating, of course, if one prioritizes prosecuting providers for protective practices against predatory payor payment policies.

The letter “P.” Give it a hand folks.

So what do you do?

You do not nationalize anything. That’s almost always a bad idea. At least as a first try. Also you don’t force a monopoly. That’s the same thing.

You try something less drastic first. You enforce the existing law as it’s written and fully justified by precedent. Well, arguably so, anyway. But you try that, right, as en enforcement priority, and maybe back off the old prosecutorial dollars for docs? Don’t fire those enforcers, by the way. Just turn them toward the payor side for a change, and stop treating monopsony power as a good thing.

Just try the reprioritization for a few years. Give it some reasonable time to hit some reasonable bench marks. My guess is as monopsony power over docs ebbs, docs begin to see a restored incentive to provide the most efficient and attractive service at the most competitive price. As that happens, monopoly power ebbs as successful payor entry is no longer conditioned on entry at equal market share. Insurance companies are then forced to become efficient at what they should do – distribute risk in an economically rational way and handle the ancillary administrative assignments. Payors are disciplined by either actual or potential entry or niche expansion. They cannot charge more than a competitive rate. Their services must be appealing to the insured life from a broad selection.

What about just trying that commonsense less radical remedy for a while and see if it works. If we need a stopgap sure let’s deal with the chronic uninsured and underinsured through some sort of grant program with maybe some market incentive substitutes thrown in for flavor. But as for the real meat of the problem, let’s try some balanced, reasonable antitrust enforcement first.

"Not really. A lot of our generics come from overs...

2009-06-30T16:05:10.583-04:00

"Not really. A lot of our generics come from overseas (Daiichi Sankyo, Ranbaxy, Teva) so we have plenty of choices."

Sorry I didn't make myself clear. I'm 70 and take a lot of drugs. There are no generics available for any of them in the US, but I get them all (except one) in generic form from India. This is what my physician reccommends. He gave me the URL.

"If the numbers given in Senate testimony are corr...

2009-06-30T16:02:32.454-04:00

"If the numbers given in Senate testimony are correct, it's about $150 - 200 Billion every year. You'll never get rid of that as long as you have private insurance. That's what they're in business for."

Again, This can easily be addressed by having some kind of individual mandate that everyone buy insurance + community rating (insurers cant cherrypick only the healthy people) or single payer. Cherrypicking is overwhelmingly the largest component of administrative costs, it needs to be cut out.

"Also while generics in the US are cheap (but not as cheap as India), there are many more generics in other countries. I get all my drugs from India."

Not really. A lot of our generics come from overseas (Daiichi Sankyo, Ranbaxy, Teva) so we have plenty of choices. And yes, generics are cheap in India but because compliance to safety standards and copyright and patent laws are minimal.

Never said it was all profit. McKinsey (you must h...

2009-06-30T15:39:43.786-04:00

Never said it was all profit. McKinsey (you must have meant $120 - 150 Billion) is only only talking about aqdministration on the insurance side. That's a little low. You can figure it out yourself by looking at the medical cost ratios (= 1- overhead). If the numbers given in Senate testimony are correct, it's about $150 - 200 Billion every year. You'll never get rid of that as long as you have private insurance. That's what they're in business for.

And it ignores the huge compliance costs. France has fee for sevice, but all treatments only require the same one page form. The recent Commonwealth Fund study show that people with private insurance have 2.5 times as many problems as people with Medicare.

On drugs, your figure is again a little low, but not bad. But 10% is $240 Billion a year and a third of that goes to "marketing" and a fifth of that goes to profit which is twice as high as the avergae of other industries. Also while generics in the US are cheap (but not as cheap as India), there are many more generics in other countries. I get all my drugs from India.

I'm not wedded to single payer, but it just seems simpler and we are already part way there. Furthermore as I said if we have a single payer system like HR676, then we can get good national data and put pressure on physicians to improve their practice.

Unfortunately, GROG was not very forthcoming with ...

2009-06-30T15:37:12.997-04:00

Unfortunately, GROG was not very forthcoming with his sources. The only reference is the "Waiting Your Turn" publication, put out by The Fraser Institute, a libertarian think tank based in Canada.

Here's a link to the 18th edition of this document

Now I have nothing against libertarian think tanks and their publications, but promoting their information without showing link to it (or even a source for it) seems a bit disingenuous.

"Other countries with single payer systems get bet...

2009-06-30T15:07:19.492-04:00

"Other countries with single payer systems get better health care as measured by all the basic public health statistics and they do it at less than half the cost per person."

But many countries beat us by having universal health care without resorting to single payer.

Furthermore, Singapore doesnt even have universal health care. Everyone pays for care from mandatory savings accounts, and they get one of the best outcomes in the OECD and spend only 7% of GDP on health care.

@ lensch: "We waste $100 - $200 Billion a year on...

2009-06-30T15:01:46.858-04:00

@ lensch:

"We waste $100 - $200 Billion a year on the high overhead of insurance companies."

Yes thats an unnecessary cost, but thats not the same thing as profit. This can easily be addressed by having some kind of individual mandate that everyone buy insurance + community rating (insurers can cherrypick only the healthy people) or single payer.

According to McKinsey, we spend about $12-150 billion more than we have to when it comes to administration.

http://economix.blogs.nytimes.com/2008/11/21/why-does-us-health-care-cost-so-much-part-ii-indefensible-administrative-costs/

"We pay the highest drug cost in the world to drug companies"

In fact, pills account for barely a tenth of health-care spending in America and similarly small shares elsewhere. Europe does indeed spend less on new branded drugs, but also uses fewer generic drugs and pays much more for them. And Switzerland actually has higher drug prices than America. When it comes to generics, the US has the lowest prices in the world. Greedy drugmakers are not the main cause of America’s runaway costs.

"Other countries with single payer systems get better health care as measured by all the basic public health statistics and they do it at less than half the cost per person."

That is true

I gues I mught as well jump in with my two cents o...

2009-06-30T14:52:48.913-04:00

I gues I mught as well jump in with my two cents on the public option which I oppose.

The President says we have to take incremental steps. Medicare for All IS an incremental step. Step one was Medicare for the highest risk pool, old fogies like me. Step 2 is Medicare for everybody else which is actually easier because it does not cost any more (see below). Step 3 would be more efficient medical practice.

The main reason that it is far better to extend Medicare to everyone is cost. Private insurance companies waste about $400 Billion each year in high overhead and unnecessary requirements on physicians. There is another $100 Billion wasted on high drug prices to companies that spend 3 times as much on "marketing" as on R & D. This $500 Billion each year can be used to pay for the extension of Medicare to everyone.If you simply add a public plan, you are leaving the $500 Billion on the table. You are simply adding cost. This is just stupid.

In addition, there are technical reasons just adding a public plan is foolish. If it has to take everyone while private companies can pick and choose , it will wind up with another high risk pool--the sick and the poor. While the idea of creating another pool is bad enough, if it is a high risk pool, it will be very expensive. The Republicans will seize on this and progress will halt. Also if it covers preexisting conditions, then it will greatly expand the pool of the self insured which is terrible from an efficiency point of view. After all, why pay premiums when you are well?

Finally as to the attitudes of the public, Representative Anthony Weiner recently held a telephonic town meeting with 4,700 members of the public. He asked who preferred the public plan option and who preferred Medicare for All. Two thirds preferred Medicare for All. Then the Representative said the private insurance industry would never permit that option.

Who is running this country?

npunwani - While you are correct, the big savings ...

2009-06-30T13:55:47.357-04:00

npunwani - While you are correct, the big savings are not in insurance costs, those big savings (fee for service, etc.) will be extremely difficult to get at. There are enough savings in the elimination of private insurance to give everyone decent health care and then we will be in a better position to go after the hard problems.

Fact - Actually there's a way we can have better universal health care at no more than we are now paying (see 5. below). Here are the facts (cf. www.pnhp.org):

1. We waste $100 - $200 Billion a year on the high overhead of insurance companies.
2. We waste $200 - $300 Billion a year on doctors filling out forms for insurance companies.
3. I don't know the compliance cost of patients fighting with insurance companies, but it must also be in the 100's of Billions.
4. We pay the highest drug cost in the world to drug companies that spend twice as much on profit and three times as much on "marketing" as they spend on research. This is about another $100 Billion each year.
5. Because of the above, we could give Super Medicare (few limitations, no co-pays, no deductibles and complete drug, dental & mental coverage) to everyone at no more cost per person than we are now paying.

Other countries with single payer systems get better health care as measured by all the basic public health statistics and they do it at less than half the cost per person. If we build on our rotten system, we will get a health care system with rotten foundations.

Taking out profits from health care won't really d...

2009-06-30T13:30:11.970-04:00

Taking out profits from health care won't really do much, maybe save a couple percentage points (1-3%) from gross health care spending.

If you really want to control costs, go after the fee for service system thats the real culprit. Unnecessary procedures constitutes 30% of health care spending.

@ ta: "under Dem leadership, tho, we can do bette...

2009-06-30T13:19:22.331-04:00

@ ta:

"under Dem leadership, tho, we can do better: the public option is a more sure way to remove profits from the healtch care equation. and profits are what drive costs up more than anything."

That is patently false, a CBO report in 2008 says that half of the growth in health care spending since the 1970s is due to the rapid diffusion of new medical technologies. According to health economist Uwe Reinhardt, insurance profits are about 5-6% of revenues.

Nate nails it, yet again! Great analysis. Insura...

2009-06-30T13:06:34.381-04:00

Nate nails it, yet again! Great analysis. Insurance companies aren't providing any services for all of that money that they take from us. They're just extracting monopoly rents.

Providing INSURANCE not HEALTH CARE is easy to do. You just need a big pool of money, a call center and bureaucrats to handle claims. I'm pretty sure that the government can do those things.

I don't know why people aren't more afraid of private insurers who spend all of their intellectual horsepower trying to screw consumers out of more money by denying insurance, claims or encouraging me not to visit the doctor.

Grog says wait times in other countries are longer...

2009-06-30T12:15:51.749-04:00

Grog says wait times in other countries are longer than those in the US, but that only looks at the patients who actually received the treatment. Since everyone is covered in the other countries, that does not effect the result, but in the US where millions have no insurance, there are many people who need surgery who never get it. His statistics ignores these people whose wait time is infinite. Obviously if you only give a benefit to some of the people you can do it faster.

Actually the waits are nowhere near what the conservatives say. For Canada go to http://canadaonline.about.com/od/healthcarewaittimes/Wait_Times_for_Health_Care_in_Canada.htm

Furthermore the reason the wait time are longer for these benefits has nothing to do with the fact that other countries have more efficient systems, but because they spend less than half per patient than we do. I invite the reader to try to imagine the wait times in our system if we cut health care payments by over 50%.

Finally, the bottom line is that if you look at all the basic public health statistics (life expectancy, infant mortality, etc.) or the WHO rankings, these other countries provide much better health care and they do it at much less cost.

Survival rates are a terrible statistic for comparing ciountries. Here are mortality rates for cancer.

Per 1000 people the US has 321.9, Australia 298.9, Canada 296.4, France 286.1, Austria 280, Sweden 268.2 Finland 255.4, and the UK 253.5.

Here is a question from a Washington Post - ABC poll:
"Which would you prefer: the current health insurance system in the United States, in which most people get their health insurance from private employers, but some people have no insurance, OR, a universal health insurance program, in which everyone is covered under a program like Medicare that's run by the government and financed by taxpayers?"

62% favored Medicare for All; 33% were opposed. That's pretty decisive. And this is with the facts suppressed. Other questions in the poll show that the 62% supporting the universal program mostly believe it will cost more when it will cost less. They believe they won't be able to pick their doctor when Medicare allows much more freedom than most private plans. They believe there will be long waiting times when this is a myth. And still they support a universal plan like Medicare for All by 2 to 1.

@Nate: "neither Wyden nor Bennett have received pa...

2009-06-30T11:25:53.503-04:00

@Nate: "neither Wyden nor Bennett have received particularly much from health care PACs, nor have many of the bill's co-sponsors -- this is a definite positive indicator."

The enemy of my enemy is my friend?

@Juris - The original discussion of Economics that...

2009-06-30T11:00:35.790-04:00

@Juris -
The original discussion of Economics that Krugman references and a mountain of other very interesting papers are at http://stevereads.com/papers_to_read By the time you understand all that is there I would think an economics PhD would be a breeze or perhaps one could just award themselves a Pdf.

One issue that plagues the Chamber of Commerce is ...

2009-06-30T10:27:19.986-04:00

One issue that plagues the Chamber of Commerce is that they know that there are many individuals who work ONLY to get health insurance benefits. Given the option to purchase from the government, many of those who can afford it will simply drop out of the work force once they get their health insurance. Fewer workers will then force businesses to raise wages in order to make up the difference. This is one reason why many businesses are conflicted over the whole health care issue. They LIKE workers to be dependent upon them for insurance.

Max Baucus is SUCH a prick. There, I said it.

2009-06-30T10:08:05.443-04:00

Max Baucus is SUCH a prick. There, I said it.

"The Obama administration says it wants a public i...

2009-06-30T10:01:47.251-04:00

"The Obama administration says it wants a public insurance plan that will compete on a level playing field with private plans (that is, without taxpayer subsidies). Is there any cogent economic analysis that suggests that such a policy addresses problems of adverse selection and moral hazard? None that I know. If it has to stand on its own financially, the public plan has no special advantage in addressing these issues."

I'd like to see you address this specific line without shrugging off Mankiw's entire response and without resorting to ad hominem attacks. Thanks.,

How About A Lawsuit Policy? I think what we need ...

2009-06-30T09:47:24.750-04:00

How About A Lawsuit Policy?

I think what we need is a new government backed industry: Health Care Legal Expense insurance (HCLE).

Besides eliminating the pre-existing condition setup, I would like a cheap policy that lets me sue the ass off my insurance provider at no cost to me if they try to deny me coverage; with some kind of damages for the inconvenience if they lose.

It is simple and competitive. The insurance companies can make a profit, but they cannot do it through ripping people off. We don't need any new laws, we just need a new kind of insurance; and we can subsidize the HCLE premiums for the poor. Let lawyers bid for the premiums on some number of HCLE policies; so there is a market there as well, and if they win their suits they get some share of the damages awarded.

Pit one vicious beast (the insurance companies) against the other (the lawyers), and make sure they cannot collude and it is a zero-sum game for them. The reason people get ripped off is because they cannot afford to sue, or lawyers won't take their case because there is too little money in it. Well, HCLE can fix that.