March 30, 2004

David Cutler Pleads for Universal Health Insurance and Pay-for-Doctor Performance

Speaking at Brookings, David Cutler looks forward to a better health care system:

"We can do this for about one-half to two-thirds of the cost of the Bush tax cuts," Cutler said. He called for a transition to a "pay-for-performance" system that would add five percent to Medicare payments through a "quality improvement fund." Doctors would be assigned points for meeting quality standards and would lose points for failing to meet such standards. Funds would be awarded based on a doctor's point accumulation. Cutler conceded that the system's future would require sacrifice by citizens and clear-thinking by politicians. "If we want to afford more medical programs, we just need to say that we're willing to do that," Cutler said...."

Not all panelists agreed with Cutler, however. "I don't share David's optimism about the political process," said Leonard E. Burman, a senior fellow at the Urban Institute. "Universal health coverage would have to be based on tax credits, but it's hard to think of Congress agreeing to $7,000 refund credits per family." President Bush's plan calls for a $3,000 credit per family only for insurance purchased separately from employer-based programs, a measure that Burman said would "undermine employment-based health insurance while still being grossly inadequate for people unable to pay for insurance."

Stuart Butler, vice president of Domestic and Economic Policy Studies at the Heritage Foundation, agreed that universal health coverage was a worthy endeavor, but said it's be difficult to fund. "Paying for it is tricky," said Butler. "To get adequate universal coverage would cost roughly $70 to $100 billion a year…I just haven't figured out how to persuade people to ante up. Until we figure it out, it's the part of [Cutler's] prescription that we're really never going to achieve."

Posted by DeLong at March 30, 2004 06:34 PM | TrackBack | | Other weblogs commenting on this post
Comments

Or you could try a single-payer system, and spend no additional cash.

I know, I know...

Posted by: Kevin Brennan on March 30, 2004 06:41 PM

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We could make a lot more headway and cost containment by providing a more primary health care services for a subsidized small out of pocket fee (say $10) than continuing to do what we do. No other country ignores the easy fixes and preventative medicine and then jumps in with expensive heroic methods once the preventive phase is too late.

The US should target problems like low birth weight babies that can be prevented but cost a small fortune in hospitalization. The overall health of the babies would be better. We could provide free prenatal care for all expecting mothers for a fraction of what it costs to care for premature babies.

Posted by: bakho on March 30, 2004 07:21 PM

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There is a magic number (say, of average annual HC cost to indivs or families) somewhere that will trigger people's willingness to endure a major change to the system, and a correspondingly higher tax bill. What is that number? We're not there yet, but there must be some threshold where enough people say,...."this is completely insane."

Maybe double what people are paying now? When upper middle class and wealthy Republicans start saying, "rein in these increases, forget all the market fundamentalism, just give me relief"?

Clearly not enough people are there yet to create the necessary political heat, but it's inevitable.

Posted by: Crab Nebula on March 30, 2004 07:34 PM

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The US spends more on health care per capita than Canada - go to single payor and while there will be transition costs in the middle run (a few years) you'll find it actually costs less. The problem with the US system is that you pay more to get worse results.

Posted by: Ian Welsh on March 30, 2004 08:10 PM

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Caleb writes:

> Why do idiot liberals always think tax cuts "cost" money?
> If I don't get to rob you at gunpoint, are you "costing" me
> money?

I can't speak for idiot liberals, but, for me, the point is really clear. The pre-existing tax structure in 2001 could be estimated to provide $X trillion in revenue to the federal government. After the tax cut, we would have only $Y trillion in revenue, and we have Y < X. So it makes perfect sense to say that the tax cut cost the Treasury X-Y trillion dollars in expected revenue. That's how the English language is used.

The robbery analogy you make is silly because you had no legal standing to take any money from me in the first place, and you clearly had no plan, however misguided, to use that money to promote the general welfare or my interests.

Now, before anybody flames me for responding to an obvious troll, I confess I did it just to see how far I could whack the sucker. I don't think I'll need to take a second shot.

Posted by: Jonathan King on March 30, 2004 08:19 PM

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How would doctors' performance be appraised?

Posted by: Julian Elson on March 30, 2004 08:44 PM

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Caleb:

In Clinton's last year, the US spent less than $1.8 trillion. In 2003, we spent over $2.1 trillion. In 2000, we had a surplus. Since Bush was elected, the debt has increased by $1.5 trillion.

Bush has not cut taxes. He is soaking us with hundreds of billions every year in new spending. The taxes are not "cut". The taxes are just "deferred". In 2002 and 2001, the US govt collected more in taxes than under Clinton in 1999. In all 3 years of Bush, the US has collected more in taxes than all but the last 2 years under Clinton.

Tax cuts? Ha Ha! What tax cuts?? It was only the wealthy that got tax cuts. Meanwhile the states are getting soaked by unfunded mandates. Our State sales tax has gone up by 20% as has our state gasoline tax. Tax cuts? Ha! GOP tax cuts only benefit rich people.

You see Caleb, taxes are only truly cut if government spending is cut. Bush is a bigger spender than Clinton. Under Clinton, spending went up less than 30% in 8 years. In 3 years of Bush, he has increased spending by almost 21%. Since increased spending has to be paid by increasing taxes, Bush has increased our taxes by 21% already. We cannot afford too much more of the SPEND and BORROW GOP. And Caleb thinks there is a tax cut?

Posted by: bakho on March 30, 2004 09:24 PM

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US will have a single-payer health insurance - when businesses, unable to provide it to their employees cheaply, will demand it of the state. Given the current trends for medical expenses I would expect it to happen in about 5 years. Clinton started it too early - it was not as much of a problem for employers at that time.

Posted by: bubba on March 30, 2004 11:11 PM

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The thing that amazes me is that Stuart Butler, vice president of Domestic and Economic Policy Studies at the Heritage Foundation has only such a mild criticism of Cutler. $70 billion to $100 billion a year, about 1% of GNP, about the cost of the war in Iraq. In a sane country, it would be politically no problem.

I would say that Julian's concern is much more problematic. I think the problem is that we Americans do not trust politicians or bureacrats. How is quality measured ? Who appoints the people that decide ? That appears to be just part of Cutler's proposal -- a part which is not required for universal coverage. Still I suspect that it is the part, not the cost, which would be featured in Health Care Inc attack adds like those which worked last time.

Posted by: Robert Waldmann on March 30, 2004 11:24 PM

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"US will have a single-payer health insurance - when businesses, unable to provide it to their employees cheaply, will demand it of the state."

Perhaps. But I think in the world of globalization the only reason businesses are partially covering their employees' insurance cost today is because they did it last year. When they figure out it's no longer necessary to pay it to retain a workforce it will be gone. I think we're at that point already, but thru inertia the benefit remains, albeit whittled back.

In the chaos that reigns after the plug is finally pulled it will be the health industry with no reliable customers that demands state intervention. The Medicare bill with it's generous provisions for drug companies and private insurers is the tip of that iceberg.

Posted by: dennisS on March 31, 2004 06:13 AM

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I think I'm going to have to go with dennisS on this one. More and more employers will be dropping coverage for their employees due to high costs. A continuing weak labor market means there'll be little backlash from their employees (who will now REALLY need to keep their jobs in order to pay for their healthcare). It'll get worse before it gets any better.

Posted by: --locus on March 31, 2004 06:44 AM

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I agree with DennisS. However, I hope we don’t have to wait for a depression (as we did for the creation of Blue Cross) to get meaningful change such as single-payer insurance.

From “Doctors, Patients, and Health Insurance” by Sommers & Sommers.
Brookings, 1961. p. 291.

“The Blue Cross idea was the product of the economic distress of the nation’s hospitals when the great depression left them with empty beds and unpaid bills. The inspiration for the idea came not from the insurance companies nor from medical societies but from sporadic consumer and hospital efforts, dating back to the 1880’s, to establish local nonprofit prepayment plans.”

Sommers & Sommers also quote James E. Stuart, EVP Blue Cross Assoc. in 1958:

“The ancestry, parentage, and legitimacy of Blue Cross has been variously described by those who admit responsibility for its existence. It had been said that Blue Cross was sired by the depression and mothered by the hospitals out of desperate economic necessity. It was certainly born unattended by organized medicine and without benefit of actuarial science.”

Posted by: Richard in Cambridge on March 31, 2004 07:41 AM

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Brad,

Several weeks ago, you mentioned that David Cutler’s book, “Your Money or Your Life,” had moved near the top of your reading pile. I have postponed purchase until I see your comments on it. Have you had a chance to read it?

Posted by: Richard in Cambridge on March 31, 2004 07:49 AM

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DennisS writes: But I think in the world of globalization the only reason businesses are partially covering their employees' insurance cost today is because they did it last year. When they figure out it's no longer necessary to pay it to retain a workforce it will be gone. ... In the chaos that reigns after the plug is finally pulled it will be the health industry with no reliable customers that demands state intervention.

Richard in Cambridge writes: I agree with DennisS. However, I hope we don’t have to wait for a depression (as we did for the creation of Blue Cross) to get meaningful change such as single-payer insurance.

Globalization does not affect enough people for that. Besides, employers need healthy workforce. Of course, state needs to work with the businesses to make it happen. If it keeps peddling medical savings accounts instead of getting employers together and explaining how it is going to be cheaper for them to use single-payer system, we will tailspin into the crisis you predict. Maybe workers comp can be an extra carrot - you use single-payer and you do not have to worry about a portion of workers comp.

Posted by: bubba on March 31, 2004 08:58 AM

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Richard, come on, man. David Cutler is one of the most interesting and serious thinkers on health care in America. If you're interested in the subject, why would you wait for Brad to tell you whether or not the book is worth reading? Even if he tells you it's not, isn't it possible that you'd have a different opinion?

Posted by: Steve Carr on March 31, 2004 09:10 AM

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"Globalization does not affect enough people for that. "

All that it has to affect is 5% of the labor force or so each year, to keep quite a squeeze on US workers. Maybe less. Given 4% GDP growth, and 3% productivity growth, domestic employment would be 1%, with no foreign labor arbitrage. IIRC, 1% is just about the growth rate of the US labor force. So less than 5% annual globalization could have serious consequences on US employment.

"Besides, employers need healthy workforce."

And don't want to pay for health care.


"Of course, state needs to work with the businesses to make it happen. If it keeps peddling medical savings accounts instead of getting employers together and explaining how it is going to be cheaper for them to use single-payer system, we will tailspin into the crisis you predict. "

Given the GOP and health insurance industry, I'd bet on incompetancy and corruption.

"Maybe workers comp can be an extra carrot - you use single-payer and you do not have to worry about a portion of workers comp."

Posted by bubba at March 31, 2004 08:58 AM

Posted by: Barry on March 31, 2004 09:29 AM

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"If you're interested in the subject, why would you wait for Brad to tell you whether or not the book is worth reading?"

Speaking personally, I'm not interested enough in the subject to want to read the book right now, but I want to fool other people into believing that I am knowledgeable about it. So I'm waiting for Brad to read it and tell us all the good bits.

Posted by: Daniel Lam on March 31, 2004 09:36 AM

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Dear Steve Carr,

I am a retired old fart and not up-to-date in this arena. I am getting an education reading Brad's log and the comments.

I had not heard of David Cutler before seeing his name in Brad's log. You have encouraged me to look further and I found out more about him:
http://post.economics.harvard.edu/faculty/dcutler/dcutler_cv.html
Thanks for the push...and, hey, I see that Cutler is practically in my own back yard.

Posted by: Richard in Cambridge on March 31, 2004 09:37 AM

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Richard, apologies for the tone. I just assumed that anyone who knew who David Cutler was would probably profit from reading his book. He really is a good thinker and a surprisingly accessible writer on a subject that can often be mind-numbing.

Posted by: Steve Carr on March 31, 2004 09:46 AM

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As a refugee from a chemical company, why are there not more pilot schemes out there for these problems? For education, health, voting machines, and there must be others.

Posted by: big al on March 31, 2004 10:25 AM

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xxxx

Posted by: Bobby Corcoran on March 31, 2004 10:29 AM

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I would like to take a different tack.

The US health system has really been organized
on a "cost -plus" system. That means it works like suppliers to the Pentagon. The entire HMO movement was based on the idea of changing the health care system from a "cost-plus " structure to one that responded to economic, market pressures. That generated a one-time savings in costs, but that is now over. Until we do something to change the system from a "cost-plus" system we will not resolve the problem of soaring costs and healthcare being priced out of
the reach of more and more Americans. I doubt that a single payer system would do much to change the "cost-plus" nature of the system.

Posted by: spencer on March 31, 2004 11:03 AM

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A major reason employment growth is so weak this cycle is that employees do not want to take on the responsibility of all the fringe benefits and health care insurance is the major factor in that. So, soaring healthcare costs is a significant reason for weak employemtn.

Posted by: spencer on March 31, 2004 11:06 AM

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"A major reason employment growth is so weak this cycle is that employees do not want to take on the responsibility of all the fringe benefits and health care insurance is the major factor in that."

There is absolutely no evidence this is so. Since the burden of rising benefit costs have been shifted to employees rather than employers, there is reason to believe this often used reason for lack of hiring is not true. Wages and benefits have been stagnant to falling since the recession ended in November 2001. The data are well documented at epinet.org.

Posted by: anne on March 31, 2004 12:29 PM

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http://www.nytimes.com/2004/03/26/opinion/26KRUG.html?n=Top%2fOpinion%2fEditorials%20and%20Op%2dEd%2fOp%2dEd%2fColumnists%2fPaul%20Krugman

The Medicare Muddle
By PAUL KRUGMAN

In advance of Tuesday's reports by the Social Security and Medicare trustees, some credulous journalists wrote stories based on tips from advocates of Social Security privatization, who claimed that the report would offer a radically downgraded vision of the system's future. False alarm: projections for Social Security are about the same as last year. Projections for Medicare, however, have worsened: last year the trustees predicted that the hospital insurance trust fund would last until 2026, and now they've moved it back to 2019.

How should we react to this news?

It has become standard practice among privatizers to talk as if there is some program called Socialsecurityandmedicare. They hope to use scary numbers about future medical costs to panic us into abandoning a retirement program that's actually in pretty good shape. But the deteriorated outlook for Medicare says nothing, one way or another, about either the sustainability of Social Security (no problem) or the desirability of private retirement accounts (a lousy idea.)

Even on Medicare, don't panic. It's not like a private health plan that will go belly up when it runs out of money; it's just a government program, albeit one supported by a dedicated tax. Nobody thinks America's highways will be doomed if the gasoline tax, which currently pays for highway maintenance, falls short of the system's needs — if politicians want to sustain the system, they will. The same is true of Medicare. Rising medical costs are a very big budget issue, but 2019 isn't a drop-dead date.

The trustees' report does, however, give one more reason to hate the prescription drug bill the administration rammed through Congress last year. If deception, intimidation, abuse of power and giveaways to drug companies aren't enough, it turns out that the bill also squanders taxpayer money on H.M.O.'s.

A little background: conservatives have never mounted an attack on Medicare as systematic as their effort to bully the public into privatizing Social Security. They do, however, often talk about Medicare "reform." What this amounts to, in practice, is a drive to replace the traditional system, in which Medicare pays doctors and hospitals directly, with a system in which Medicare subcontracts that role to private H.M.O.'s.

In 1997 Congress tried to take a big step in that direction, requiring Medicare to pay per-person fees to private health plans that accepted Medicare recipients. There was much talk about the magic of the marketplace: private plans, so the theory went, would be far more efficient than government bureaucrats, offering better health care at lower cost.

What actually happened was that private plans skimmed the cream, accepting only relatively healthy retirees. Yet Medicare paid them slightly more per retiree than it spent on traditional benefits. In other words, instead of saving money by subcontracting its role to private plans, Medicare was in effect required to pay H.M.O.'s a hefty subsidy.

The only thing that kept this "reform" from being a fiscal disaster was the fact that after an initial rush into the Medicare business, many H.M.O.'s pulled out again. It turns out that private plans are much less efficient than the government at providing health insurance because they have much higher overhead. Even with a heavy subsidy, they can't compete with traditional Medicare.

There's a lesson in this experience. Sometimes there's no magic in the free market — in fact, it can be a hindrance. Health insurance is one place where government agencies consistently do a better job than private companies....

Posted by: anne on March 31, 2004 01:22 PM

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But I think in the world of globalization the only reason businesses are partially covering their employees' insurance cost today is because they did it last year.

If I understand correctly, businesses get a tax write-off for paying for their employees' health insurance, but individuals don't get the same write-off if they buy it for themselves. Therefore the federal government has made it more efficient for employers to buy it, which has the effect of tying health care to employment.

Posted by: digamma on March 31, 2004 01:55 PM

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Anne, I don't mean to be rude, but pretty much every sentence in this passage -- "There is absolutely no evidence this is so. Since the burden of rising benefit costs have been shifted to employees rather than employers, there is reason to believe this often used reason for lack of hiring is not true. Wages and benefits have been stagnant to falling since the recession ended in November 2001." -- is false.

Here's the relevant data from the Bureau of Labor Statistics, through December 2003, http://www.bls.gov/news.release/eci.nr0.htm:

Far from being stagnant or falling, compensation costs for employed workers have risen at about the same pace since 2000 as they did in the three years previously (3.4% in 1998, 3.4% in 1999, 4.1% in 2000, 4.1% in 2001, 3.4% in 2002, and 3.8% last year).

A crucial element of those increases in compensation has been the rise in benefit costs (of which health insurance is obviously the biggest ingredient). For workers in private industry, in 2003, wages and salaries rose 3%, while benefits rose 6.4%. In the last quarter of 2003, half of the increase in compensation was due to rises in benefit costs. It certainly seems anecdotally true that companies are asking employees to pay more for their health insurance, but the idea that employees with health insurance bear the primary burden for health-insurance costs is simply wrong.

Given this, I think there's something to Spencer's analysis of the weak job market. Which is yet another reason to do away with the employment-based provision of benefits and replace it with health insurance and retirement plans that are portable.

Posted by: Steve Carr on March 31, 2004 02:00 PM

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digamma, self-employed people can now write off 100% of their health-insurance costs. I'm not sure how people who work for companies that don't offer benefits are treated, but I suspect that for tax purposes they count as self-employed.

Posted by: Steve Carr on March 31, 2004 02:06 PM

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Several surveys of employeer intentions document that rising healthcare cost are playing a significant role in the weak employment situatuion.

One west coast hightech executive that has been hiring temps is quoted as saying he will never hire another permanent employee.

Real wage & salaries have been stagnant,
but nominal fringe benefits have been rising much faster than wages as Carr pointed out.

Health care insurance has always been paid out of pretax dollars but if employees were to pay
health insurance costs directly it would have to be out of after-tax income. The fact that it is out of pretax income is a major structural reason the system exist as it does.

Posted by: spencerS on March 31, 2004 02:11 PM

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Spencer -

"Several surveys of employer intentions document that rising healthcare cost are playing a significant role in the weak employment situatuion."

The point is important, but Alan Krueger leads me to argue that it is not correct. The employer rationale appears a mask. I will return to the argument when there is a moment.

Posted by: anne on March 31, 2004 02:50 PM

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http://www.nytimes.com/2004/03/04/business/04scene.html?ex=1080882000&en=3016af3cab8f7ff0&ei=5070

Schwarzenegger's Next Big Challenge
By ALANB. KRUEGER

AFTER winning authority to borrow to keep the state afloat, the next test of Gov. Arnold Schwarzenegger's ability to govern will not involve gay marriage or a constitutional amendment permitting immigrants to be president. Instead, it will be fixing the crisis in California's workers' compensation system, the program that provides cash benefits and medical services to millions of workers injured on the job.

"I call on the Legislature to deliver real workers' comp reform to my desk by March 1," Mr. Schwarzenegger said in his state of the state address in January. "Modest reform is not enough."

That deadline has come and gone. With the Legislature still deliberating and the governor drafting a ballot initiative, it is unclear what will happen next - but it is clear that the state workers' compensation system needs surgery. The predicament highlights what can go wrong in workers' compensation, a program that generally works well in most states.

Workers' compensation was the nation's first social insurance program. Most states passed laws in the 1910's and 1920's that made companies liable for workplace injuries on a no-fault basis, but limited the amount they had to pay. Workers gave up the right to sue their employer. The conventional wisdom is that workers and employers gained because the prevailing court system had been unpredictable and inefficient. Workers had typically received little from filing a negligence suit, and legal costs were high.

After California passed workers' compensation legislation in 1911, legal disputes were all but eliminated: fewer than 2 percent of claims for permanent injuries were contested in 1924-25. The central problem in California now is that the costs paid by employers are the highest in the country, while the benefits received by workers are about average - in part because many cases are disputed, which wastes resources.

Total costs for California employers increased to $29 billion in 2003 - eight times the gross domestic product of Haiti - from $11 billion in 1998. By one estimate, the average employer in California pays 5.2 percent of payroll for workers' compensation insurance, more than twice the average of other states. Rates are much higher in hazardous occupations: 43 percent for loggers, 33 percent for roofers, 22 percent for carpenters and 18 percent for truck drivers.

The governor maintains that these high costs are the main reason jobs are leaving the state. But this confuses who writes the check (employers) with who bears the burden of the program (employees). Research has found that most workers' compensation costs are shifted to workers in the form of lower wages over time, so the effect on jobs is probably minimal.

Nonetheless, reducing inefficiency and administrative costs is to everyone's benefit....

Posted by: anne on March 31, 2004 03:03 PM

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WHY IS IT COMPLETELY UNIMAGINABLE THAT WE NOT HAVE THE ABSURD NAPOLEONIC GRAND ARMEE THAT HAS PROTECTED US FROM HITLER FOR DECADES AFTER HITLER'S DEATH? We could pay that basic criterion of civilization, socialist health care (as opposed to our broken constitutional promise about "life, liberty, etc"), with a f'ing small portion of the mountains of cash we happily dump into the five-sided money incinerator!

Posted by: kei & yuri on March 31, 2004 05:51 PM

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Spencer:

The point about cost-plus systems of payment is that they incentivize cost increases precisely when the motive of profit is at stake, as with the "defense" industry. So the trend toward privatization/corporatization of health care- (how many hospitals in the 1960's were non-profits compared to today?)- speaks to that point and the politicization of health care under current circumstances also includes a fair amount of rent-seeking behavior- (e.g. the recent Medicare bill).

Now cost is the prime issue in health care, with the aging of the population and the growth in medical science/technology, and the containment of costs must involve some sort of rationing of health care treatment, based on overall outcomes, cost-benefit analysis and considerations of equity. Functionally considered, the purpose of profit is to replace and improve capital stocks and to redistribute them to assure an optimal intersectoral allocation with respect to productive efficiency and the meeting of demand. As things stand, the apparently undelimitable demand for health care is absorbing more and more of the capital allocation and productive resources of the economy, without necessarily yielding improved results in outcomes, nor greater efficiency in use of resources. Ultimately, a system needs to be put in place to evaluate- (and constantly re-evaluate as science and technology develop)- the distribution of syndromes and the efficacy of treatments with respect to their overall health outcomes and considerations of equity and the quality of life. This in itself would require quite some "capital" investment to develop together with the administrative means of organizing the production system of health care with respect to the efficient use of resources- (which does not necessarily involve penny-wise-pound-foolish policies of increasing physician throughput, which might compromise the quality and efficacy of care.) The rationing and rationalization of health care can be left to the "free market" and to the fabled and mysterious operation of market forces to produce the rationing and rationalization. But more likely than not, this would result in increasing costs producing overprovision for some- (cryogenic preservation!)- and underprovision for many- together with all the additional socio-economic costs of such underprovision. Or the rationalization can take place through the agency of collective action, i.e. the government, with its public authority to make decisions stick by virtue of the death-dealing power of the sovereign, and on the basis of a deliberative decision as to how much of the GDP we would want to spend on health care, as an overall budget constraint. I would have no illusions about the difficulties of transitioning to a public health care system and the myriad difficult decisions that would need to be deliberated, (though I would recommend an elected college of physicians and surgeons to superintend the evaluation and research process under an overall budget constraint.) But some matters, such as health and education, do not lend themselves to a market solution through commodification, because of their irreducibly qualitative dimensions and because of the importance of individual as well as aggregate outcomes.

Posted by: john c. halasz on March 31, 2004 06:00 PM

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Barry writes: "Globalization does not affect enough people for that. " So less than 5% annual globalization could have serious consequences on US employment.

5% annual globalization - you got a talent for words :). Seriously, I pointed out many times that outsourcing is a serious problem for US enigineering profession. However even 4% loss of jobs for 160 million strong workforce would mean more than 6 million jobs a year - a number that I find impossible to accept without proof.

Barry writes: "Besides, employers need healthy workforce." And don't want to pay for health care.

Just to clarify - my point was that employers will increasingly push the state to provide health care.

Posted by: bubba on March 31, 2004 11:20 PM

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bubba: "my point was that employers will increasingly push the state to provide health care."

Like they are pushing the state today to do something to give them an educated workforce (out of thin air?) -- see Andy Grove's (head of Intel) speech some time ago. Somebody will have to pony up the money. Based on what I know from other countries, it will be most likely a capped percentage tax on wages.

Posted by: cm on April 1, 2004 08:57 AM

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Steve Carr

Thanks for for arguing, and arguing well. I will gradually answer. The distinction I should have made, but did not, is compensation costs for middle income workers.

....

http://www.epinet.org/content.cfm/webfeatures_econindicators_jobspict

The 1.6% annual growth rate of the hourly wages of blue-collar workers in manufacturing and non-managers in services is tied with the lowest rate on record (posted in December 1986), going back to 1964. Even with low inflation rates running at about 2%, such slow wage growth means many workers are falling behind in real terms. This is an especially distressing fact given that productivity growth has been exceptionally strong in recent months.

These divergent trends of productivity and wage growth are among the more alarming symptoms of the persistently weak job recovery amidst strong overall economic growth. Clearly, the weakness in the labor market is preventing the gains of growth from being broadly shared with working families.

Posted by: anne on April 1, 2004 10:52 AM

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Anne, what that EPI report leaves out is precisely what we're really arguing about, namely benefits. If you look at the breakdown of the Employment Cost Index by industry and occupational category -- http://www.bls.gov/news.release/eci.t03.htm -- it doesn't appear that growth in total compensation for blue-collar or non-executive white-collar workers has significantly trailed that of executive and managerial workers. If benefits are becoming ever more expensive, it's not surprising (as Krueger's piece suggests) that wage growth has been slower. From a company's perspective, after all, whether they pay out money for health insurance or wages makes no difference to the bottom line. But the wages numbers are dismal, no doubt.

Posted by: Steve Carr on April 1, 2004 12:26 PM

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Steve Carr: benefits

I recently learnt that an acquaintance who works as a manager in a shoe store has to co-pay $250/mo for (family?) healthcare insurance. That's quite hefty (and frankly I was shocked). I get away with around $20-25 (software industry).

Posted by: cm on April 1, 2004 07:44 PM

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cm writes: Like they are pushing the state today to do something to give them an educated workforce (out of thin air?) -- see Andy Grove's (head of Intel) speech some time ago. Somebody will have to pony up the money. Based on what I know from other countries, it will be most likely a capped percentage tax on wages.

Yes, this is why employers will push the state - so they do not have to pay it and still have reasonably healthy workforce. I am sure it will be called ability to compete in the global marketplace and a source of new jobs. Of course the money will come from taxes - that's where the state gets the revenue. Still, it is better than having no affordable health care at all.

Posted by: bubba on April 1, 2004 09:16 PM

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The discussion regarding high worker's compensation insurance costs in CA. The article said that the costs are high because of litigation (or contesting of claims). There can be several reasons for that--and one is that employers deny claims for workplace injuries as a matter of policy and the workers end up having to hire attorneys, etc. Given what I've seen in OR employer or insurer dislike of claim payment is a very real possibility. Next step is to blame high premiums on lawyers, just like the Bushies were blaming high MD malpractice premiums insurance on lawyers and using it as an argument for tort "reform" and limiting malpractice awards. Even though the average award hasn't gone up. But it's easy to see why an insurer or large corporation would prefer to be effectively litigation proof no matter what its conduct.

Barbara Ehrenrich pointed out that when employers, rather then the state (nation-state) provides health insurance it becomes another way of holding onto employees in bad time, i.e. you can treat employees badly because their alternative to staying with that employer look worse. National health insurance would remove one hold an employer has over an employee. As for healthy employees--from what I've read US employers see "human capital" as a very replaceable quantity (unless it's upper upper management--they're irreplaceable apparently, or compensated as if they were), so I don't think many of them worry much about employee health. Every time I read another article about workers with mental disorders, the impression I get is that the employees (unless they are very high level) are very afraid of losing their jobs, so afraid many won't use their insurance to obtain treatment (assuming their insurance does). Apparently this fear has increased in the past few years, regardless of the alleged protections of the ADA or any comparable state laws, because of many many layoffs. It'd be nice to believe all these people are unreasonably scared, but I don't think so. I think there's a strong tradition of use 'em up and get new ones in this nation, to some extent it was counteracted by the growth of unions and somewhat different societal attitudes (and some laws) but with the decrease in union membership as well as well as Reagan's and the current administration's attitude I think there's been a resurgence of the, there's plenty more where they came from attitude, if not here then in Mexico, China or India. Or somewhere else.

Posted by: azurite on April 2, 2004 12:08 AM

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Steve Carr

Agreed completely.
Thanks.

Posted by: anne on April 2, 2004 09:46 AM

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Steve Carr

Agreed completely.
Thanks.

Posted by: anne on April 2, 2004 09:46 AM

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