November 20, 2002
Why Doesn't the Administration Have an Economic Policy?

The Wall Street Journal's David Wessel bangs his head against the wall as he contemplates the Bush Administration's lack of a long-run economic policy. "Why... dangle a Social Security plan that pretends we can preserve benefits without increasing taxes, by turning to the stock market?" There is no good answer. "Saving more, Bush economists say, is key to investing more, and investing more is key to keeping productivity growing. Government deficits soak up savings. So what's the Bush plan for fighting a war, protecting the homeland, cutting taxes and avoiding deficits?" There is no good answer. "Health-care costs are on the rise. So where is the White House strategy for devising and getting congressional approval of a plan to make Medicare work better?" There is no good answer.

Wessel concludes with a statement of what is now the conventional wisdom among serious Republicans who believe that the whole point of government is to do what is good for the country: "One Republican who has been in and out of government over the past 20 years quips privately that Mr. Bush's economic policy lacks only two things: a policy and someone to explain it."

Were I a Republican in this administration holding the job that I held during the Clinton administration, I would be truly miserable, and would be doing much more than banging my head against the wall...


WSJ.com - Capital: Promised Benefits in U.S. Are $20 Trillion in the Hole

A top U.S. Treasury official last week likened the U.S. government to a profligate insurance company that can't afford to make good on promises it has made. The cost of benefits the government vows to pay in the future exceeds projected tax revenues by roughly $20 trillion, he said. And that's no typo.

No one took much notice. Maybe that's because Peter Fisher, the Treasury's undersecretary for domestic finance, spoke in Columbus, Ohio, far outside the Beltway. Or maybe it's because his alarmism was buried in a discourse on the riveting topic of government bookkeeping.

His point is worth pondering. But is anyone in the Bush administration listening?

"Think of the federal government as a gigantic insurance company with sideline business in national defense and homeland security," Mr. Fisher said. It counts premiums and payouts as they come and go and worries little about how to pay claims in the future. "This particular insurance company, it turns out, has made promises to its policyholders that have a current value $20 trillion or so in excess of the revenues that it expects to receive," he said.

"An insurance company with cash accounting is not really an insurance company at all," he added. "It's an accident waiting to happen."

That's pretty strong stuff coming from the guy whose job makes him the chief salesman for U.S. Treasury debt.

The chart accompanying this column shows the problem. The combination of an aging population -- the oldest baby boomers turn 57 next year -- and rapidly rising health-care spending is inexorably pushing up the tab for Social Security and Medicare. President Bush wants to draw the line on federal taxes at 19% of gross domestic product (the value of all of the goods and services produced in the U.S.). It isn't enough to pay for what the government is promising.

Focusing exclusively on this year's federal deficit and the size of next year's federal debt is a mistake, and arguing about the Social Security trust fund is a diversion. Dan Crippen, head of the Congressional Budget Office, says the real issue is: How much of our children's economy are we going to take to support ourselves in retirement? Look at the world his way, and there are just two moving pieces: How much are we promising future retirees? And how big will tomorrow's economy be?

[Capital Chart]

The U.S. isn't going to raise taxes sufficiently to cover the cost of keeping current promises. It ought to take steps now to reduce future costs of Social Security, Medicare and Medicaid and to make the future economy bigger so both retirees and workers can live well.

Instead, Mr. Bush offers tax cuts as the cure to every economic ill and increased benefits to the politically potent, such as farmers. There are occasional bursts of rhetoric, and vague statements of principle from the White House. But, so far, there are few serious proposals and fewer practical political strategies for achieving those that have been floated.

Look at the economy through Republican eyes, and judge Mr. Bush's policies.

Mr. Bush's advisers believe that cutting marginal tax rates is a good way to improve long-run economic growth. Why then so much eagerness to continue the Clinton campaign to turn the tax code into a theme park full of special tax credits? Treasury Secretary Paul O'Neill says he is working on a far-reaching tax-overhaul proposal. Why then spend so much on traditional tax cuts -- and on extending them -- that there is nothing left to use as a carrot to get a tax overhaul through Congress?

Every Bush economic adviser sees what Mr. Fisher sees. Why then dangle a Social Security plan that pretends we can preserve benefits without increasing taxes, by turning to the stock market? Saving more, Bush economists say, is key to investing more, and investing more is key to keeping productivity growing. Government deficits soak up savings. So what's the Bush plan for fighting a war, protecting the homeland, cutting taxes and avoiding deficits? Health-care costs are on the rise. So where is the White House strategy for devising and getting congressional approval of a plan to make Medicare work better?

One Republican who has been in and out of government over the past 20 years quips privately that Mr. Bush's economic policy lacks only two things: a policy and someone to explain it.

Posted by DeLong at November 20, 2002 09:31 PM | Trackback

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Comments

And once again, Brad, I can only ask the question: "Why do you persist in believing that Bush and co believe their rhetoric, and are interested in what is best for the country"? Isn't it obvious from everything that they have done, from the tax restructuring to the steel tariffs to the war on Iraq to the preparations to privatize large parts of the govt that they have only two goals. That major agenda item is to make sure that a few wealthy in-the-know friends become a whole lot wealthier; the second agenda item is to do whatever nonsense (steel tariffs, religious prancing, fulminating against liberals) is necessary to delight the proles and ensure their re-election.

Exactly what has this administration EVER done to indicate a vision larger than what I've described above?

Posted by: Maynard Handley on November 20, 2002 10:41 PM

Y'know, a lot of the early apologists for Bush's lack of experience and competence said that it was okay that Bush was inexperienced and not a particularly hard worker, because he was surrounded by smart people.

Now, the problem becomes clear, though: the smart people in the adminstration are certainly there, but they are consistently ignored in favor of the clueless people.

Julian Elson

Posted by: Julian Elson on November 20, 2002 11:06 PM

This $20 Trillion liability has not suddenly appeared from nowhere in the last two years,
under Bush, has it?

If the Clinton-Gore team had and publicized a workable plan to re-finance the debt, raise taxes, reduce benefits, eliminate spending on non-core "businesses" such as defense and justice -- I missed it.

Voters are living longer, retiring (or hoping
to retire) earlier, and (in response to
40 years of urging by environmentalists, feminists, and social reformers of various motivations) producing smaller families. The
demographics underlying the 1930's economics of
the Social Security system have turned upsidedown. Yet politicians of both parties have treated discussion of changes as "the third rail -- touch it and die".

I consider it a major step forward that we are at least beginning to have the arguement. So far, nobody has, in fact, died for advocating payroll tax increase; or privatization, or
means testing... (Not that an image or two of
wheelchairs going over cliffs haven't been published.)

As long as we're discussing things, can anybody explain the logic to me of IRAs and 401Ks? We allow a deduction on INCOME (not payroll/FICA?)
tax for a worker's personal investments towards
his retirment? Given that FICA collections, now in surplus, are spent along with general funds, and that in a decade or two, income taxes will be needed to redeem the bonds held by Social Security to pay retirement obligations -- the disconnect bothers me. Why maintain two tax systems anyway, payroll and income? (I ignore the AMT, as is current policy...) FICA is regressive; highpay (top 5% ?) workers don't pay their fair share, there are no targeted deductions or tax credits -- FICA is an awful tax. Why shouldn't we be looking for ways to reduce or mitigate it -- either for those investing in their own retirement, or for putting solar collectors on the roof, driving zero-greenhouse-emission automobilies, or other socially approved missions?

So, the Bush administration has at very best a feeble and unpublicized plan. Fine. Who's on the stump detailing a better one?

Posted by: melcher on November 21, 2002 04:03 AM

"FICA is regressive; highpay (top 5% ?) workers don't pay their fair share, there are no targeted deductions or tax credits -- FICA is an awful tax. Why shouldn't we be looking for ways to reduce or mitigate it -- either for those investing in their own retirement, or for putting solar collectors on the roof, driving zero-greenhouse-emission automobilies, or other socially approved missions?"

How about reducing or mitigating it period, for everyone? Chop off a few percentage points at a time (and forget Bush's nonsense of "letting" you invest that money - giving Washington the power to "allow" you to invest in certain securities and not others gives Washington more power than it already has to blackmail corporations), and reduce future promised benefits. This will lead to a smaller deficit in the future. Repeat a few more times over the next several decades until Social Security is no more.

Posted by: Kenneth Uildriks on November 21, 2002 04:41 AM

Not to worry. As noted earlier the Republicans are counting on the Democrats to straighten out the budget. "The whole point of the strategy is ... to count on the fact that one's political opponents care more about the well-being of the country than you do."

So, yes, we are on a course, says the GAO, so that by 2030 the cost of Social Security, Medicare and Medicaid alone will consume a larger portion of GDP than the entire federal budget does today. And will still be rising, indefinitely. But the Repubs know they won't be in power all that time. And the Democrats have policies on all these things to save the day.

On the Medicare part of the budget the Democrats' policy is to add new benefits, starting with prescription drugs. Their policy on the Social Security funding gap is detailed on the blank sheet of paper that Libby Dole recently campaigned successfully with; and is further explained -- in response to Repub plans produced by Feldstein, Moynihan et. al. for actually balancing the SS budget -- in cartoons of Dubya pushing old people in wheelchairs off of cliffs.

On general tax policy, the Democrats made it clear during the last election that they don't want to raise taxes from here -- after all, in 2000 Al Gore promised to cut taxes too by almost as much as Dubya, and in the just-past Congressional election Gephardt promised $75 billion more in tax cuts.

So surely the Democrats have demonstrated that they have the sound fiscal policy the Repubs are so badly missing -- and that the Republicans' faith in them, both as future fiscal saviors and as moral superiors, "political opponents care more about the well-being of the country" than they do, is well placed. What could be clearer? ;-)

Posted by: Jim Glass on November 21, 2002 05:51 AM

It sure looks from that graph that Medicare is the major problem area. In fact, I was surprised to see Soc Security expenditures not rise as a proportion of GDP, which makes me wonder about the assumptions being used. Another thing to note is that the explosion of federal spending begins circa 2015. Given all the uncertainties of long-term projections, that is a long, long way off.

Posted by: JT on November 21, 2002 06:28 AM

Couple of things.

1. "Fixing" Social Security and Medicare really isn't very difficult. The costs of the systems are very sensitive to the retirement ages used.

There is no good reason - none - to keep the eligibility age at 65. It may have worked for Bismark, but it doesn't work for us. Coming up with a fair schedule for gradually raising the eligibility age would make dealing with the fine details much easier.

2. If they really are "the greatest generation", how come they're so greedy about their Social Security and Medicare checks?

3. For all of the Government handwringing over corporate accounting, the Federal Government's accounting is an abomination. Overhauling the system to allow for reasonably accurate costing of contingent liabilities would be very helpful, as would publishing both cash and ACCRUAL accounts. It's more than misleading when the official government accounts "expense" the cost of aircraft carriers in the current period but treat EXTENSIVE government loan and other guarantees as "free" until actual cash payouts must be made. How you keep score does affect how you play the game . . . . . .

Posted by: Anarchus on November 21, 2002 06:40 AM

I believe that this article and graph are more on target than most analyses. What you see clearly is that what dominates the future Budget is not the Bush tax cuts but the fact that we are living longer and consuming more health care.

The proposal to completely eliminate the private sector and market discipline from health care, advocated by many Democrats and most recently by Al Gore, would make matters worse. Even if the Bush Administration does nothing to solve the problem, they are doing better than the Democrats by not adding to it.

Posted by: Arnold Kling on November 21, 2002 06:52 AM

BTW, this whole discussion highlights the one simple, cheap, real, reform that would do the most to balance the books in the long run.

That is: get the federal government to stop using accounting methods that would *literally* send the CEO of a candy factory to jail. Get the federal government onto using accrual accounting, preferably even using GAAP. The cash method accounting that the government uses is *illegal* in the US for any business with inventories and $1 million of income.

IIRC, some years back the heads of the central banks of the world meeting at one of their annual get-togethers Colorado said that adopting accrual accounting was the best practical fiscal reform for governments they could think of.

On an accrual basis, the government has been running deficits continually for decades. Those "surpluses" of the late 90s were nonexistent -- as was evident from graphs like this one, which certainly were available then.

Reporting does make a difference. If every time in recent years when voters read the official budget numbers in the newspapers they'd read "half-trillion dollar deficit" and "20 trillion dollars in unfunded liabilities" instead of "surplus", there'd have been a whole different political atmosphere all along.

Deficits do constrain spending. Deficits resulted in bi-partisan "paygo" budget rules in Congress that held the growth of discretionary spending to 1% a year -- until the year the "surplus" returned, the rules fell apart and spending exploded. As was noted by former CBO director Rudy Penner on this very web site:

Q:"... the rapid dissolution of the effectiveness of the[paygo spending discipline]process after 1997 puzzles me greatly..."
"Rudy: I believe it was the surplus...."

If there had been no surplus reported, that spending surge wouldn't have happened. And since there was no surplus (under any accounting rules that would keep people in the private sector out of jail) none should have been reported.

It would be *easy* to adopt accrual accounting for the government. No big budget allocations or any such complications necessary. Just do it. After all, everyone else has to do it -- the government makes them!

So why doesn't the government do for itself what it requires of everyone else? Because reported deficits *are* a political constraint on spending, of course. Accrual accounting would be hard on the Republicans because *visibly* having $20 trillion of unfunded entitlement liabilities would make it much more difficult for them to use tax cuts as a campaign issue. But it would, of course, be much worse on the Democrats, the Entitlement Party, which campaigns in every election to make entitlements bigger and characterizes every proposed constraint on them as pushing someone in a wheelchair over a cliff.

(And that's just for starters. If the government actually did start using real, legal accounting, voters might notice that its "mis-financings" under GAAP *dwarf* anything Enron or Worldcom ever did ... and if they ever started thinking government officials should be held personally responsible for such "mis-financings" under the same standards that private sector individuals are ... oooh, better not go there.)

So one thing for sure that the two parties will always bi-partisanly agree upon is that accrual accounting isn't necessary for the government. It is much, much, more important that investors who might invest in a private firm get an accurate accounting and transparent picture of the firm's finances than that citizens who are compelled to pay taxes to and live under a government get the same from it. In fact, it's best not to trust voters with such clear information at all. They will always agree about that.

Posted by: Jim Glass on November 21, 2002 07:13 AM

>> Another thing to note is that the explosion of federal spending begins circa 2015. Given all the uncertainties of long-term projections, that is a long, long way off. <<

Given the certainty of demographics -- people who are 55 now in 15 years will be 70 -- it is a sure thing. And given the scope of the consequences, we should consider it as happening tomorrow and have started preparing for it the day before yesterday.

After all, if one is 45 years old and relying on a defined-benefit pension from a private sector employer, does one say "Aw, I'm not going to even begin to need that money for 20 years, that's so far away my employer needn't do anything about it now".

Posted by: Jim Glass on November 21, 2002 07:22 AM

The WSJ is quoted as:

>> The U.S. isn't going to raise taxes sufficiently to cover the cost of keeping current promises.<<

Which is certainly correct.

>> It ought to take steps now to reduce future costs of Social Security, Medicare and Medicaid <<

Also certainly correct. Ah, but the politics of it all. Regarding Social Security, plans by Moynihan and Feldstein and others to balance its books have been proposed and savaged by Democrats. The Republicans have no real proposals for balancing the books on Medicare but the Democrats want to add to its costs with new prescription drug benefits et. al., further imbalancing it.

So a question in good faith to any who'd care to answer: What *politically viable* proposals should come from the Democrats to reduce the future costs of Social Security and Medicare now? That is, proposals that would be politically viable across the big tent of the Democratic party.

We can imagine proposals to come from the Republicans, like the Monynihan/Feldstein ideas for SS and MSAs combined with "major calamity" insurance for medical services.

But what proposals can we expect from Democrats? I don't see any on the table now for SS, and centrist Democrats may be reluctant to embrace nationalized health care after what happened in the '94 election.

Being that the claim seems to be that Democrats have the superior fiscal policy in this whole are, it seems a valid question.

And if I was a Democrat looking to win future elections after losing one in which my party was bashed for being "policyless", I'd be thinking about it.

Posted by: Jim Glass on November 21, 2002 07:44 AM

After perusing some of the recent posts on this site, I see that walls are endangered in DeLongland. It seems that the response to every bad policy and every depressing economic indicator is for some very smart person to bang their head against the wall. Someone could make a killing in DeLongland selling ibuprofen.

Posted by: PR on November 21, 2002 08:39 AM

"FICA is regressive; highpay (top 5% ?) workers don't pay their fair share,..."

Is this an attempt to claim that high pay workers don't pay more into "Social Security" than they receive back when they retire?

I don't think this an attempt to make such a claim, because I'm certain such a claim would be totally bogus.

Rather, this is an attempt to say that high paying workers should pay in enough money to cover 50 other people's retirements, rather than the 20 other people's retirements that they currently pay for. (Numbers in previous sentence are merely placeholders. Finding the actual numbers is more effort than I wish to expend.)

I find this (Democratic) mentality appalling...that the rich don't pay their "fair share." The basic attitude is that a person's income isn't his/her own.

In 1999, the people with the top 5% of taxable income in this country paid 55.5% of the total income taxes paid! (Up from 37.1% of the total income taxes paid in 1980.)

A true "fair share" would be paying taxes for *nobody* else's retirement. The Constitution doesn't permit Congress to take money from one group, to give to another (for no service rendered).

Posted by: Mark Bahner on November 21, 2002 09:58 AM

The standard forecast embraces several dubious assumptions:

(1) productivity growth rates stay below long historic trend, and below rates implicit in private security market prices, and no infotech/biotech/othertech surge is in the cards.

(2) 50 - 75 - 100 years hence, domestic human labor remains a dominant factor of production, and labor supply remains a dominant constraint on GDP.

(3) labor supply and retirement preferences are inelastic.

(4) health care efficiency/productivity perpetually declines as technology advances.

(5) consumer market baskets remain dominated by conventional goods (for which inputs vary roughly linearly with consumption), not info-content goods (for which marginal unit cost is roughly zero).

(6) retirement benefit transfers continue on the existing AWB escalator.

(7) interest (transferred disproportionately to geezers and proto-geezers) does nothing to attenuate retirement benefit transfers.

On the other hand, projected declines in "all other spending" seem profoundly unrealistic. In other words the standard scenario is whacked. Bush fiscal strategy may be immensely stupid and totally dishonest ... but it's not as stupid as it looks.

Posted by: RonK, Seattle on November 21, 2002 10:14 AM

RonK's point (4) is what most struck me about the graph. It goes out to 2070, and assumes a huge increase in Medicare. On the technology side, I expect much greater improvements in medical technology, and expect a growing share of "more benefit for less cost" improvements over "new capabilities a huge initial costs." This should beat down a lot of the Medicare costs, especially in the out years, when it makes the most difference.

As a side note, however, this technology is likely to lead very large increases in longevity (much faster than our recent quater-year-per-year rate), which makes raising the retirement age even more important.

Posted by: Tom on November 21, 2002 10:40 AM

Mr Bahner,

The data left out of your statement on who pays what is who earns what. The top 5% certainly don't earn 55% of the income in the country, true. They do earn a big chuck of it, though and wealth holdings are easily at least as skewed as 55% going to 5%. Given any sort of support for progressivity in taxation (those near or below the poverty line shouldn't be made worse off to support a society that benefits them less than others), then it is a given that those at the top will pay more than those at the bottom. The question is, how much?

Taxes pay for the benefits of government. Given that the alternative is anarchy, under which the top 5% of earners lose more than the bottom 5% (just about all the difference between their current level of income and subsistence in many cases), the top 5% benefit most from the absence of anarchy. They are paying most for government (lack of anarchy) because they get most out of government. The oppourtuny to grow rich seems well worth paying for. Once we know who has grown rich, I see no moral reason (isn't it a moral plea for the tax-burdened rich that we so often hear?) that the well-off shouldn't carry a very large share of the burden.

I agree that we ought to be very careful about what we pay for, because what government pays for has a sizable impact on the kind of society we have. I am constantly underwhelmed by whining for the poor tax-burdened high earners for whom a well regulated society has produced so much.

Mr Glass and others,

As regards the relative weight of Bush's tax cuts and the effect of demographics on the budget, let us also consider timing. A deficit now compounds itself for the decade or so till the demographic bomb goes off. A decade or so of compounding, especially when it is guaranteed to carry on into the period of demographic trouble, is a fearsome thing. Run a surplus instead and the demographic problem, though still large, becomes more tractable.

For now, however, the need to get the economy back in shape seems the overwhelming concern. So run those stinking deficits, just maybe skew the benefits toward those who could use them most.

Posted by: K Harris on November 21, 2002 10:48 AM

As this graph makes clear, to say that the long-run budget problem is "Social Security and Medicare" is like saying that the long-run obstacle to longevity is lollipops and mortality. The entire increase in federal outlays over the long term comes from Medicare/Medicaid and the interest expenses that must be borne to finance Medicare/Medicaid spending. There is no long-run Social Security problem--just look at the graph.

And, of course, the problem isn't really with Medicare/Medicaid. It is with health care spending generally. If one were to develop a similar graph depicting the projected share of GDP devoted to health care (coming from private and public pockets), using the same assumptions underlying the graph here, the total would, if I recall correctly, surpass 100% well before the 2075 window used here. Clearly, an assumption of a constant rate of increase in health care spending is not realistic for the long term. At some point, we will decide to consume some portion of the growth in GDP over the next 75 years for something other than health care, and the Medicare/Medicaid projections will look a lot more manageable.

Jesse

Posted by: Jesse on November 21, 2002 11:28 AM

As for health care costs, why aren't we allowing foreign-trained doctors to practice in the US. This would drive down the cost of doctors and increase their availability.

Posted by: JLaw on November 21, 2002 11:34 AM

I am constantly underwhelmed by those who erect the straw-man of anarchy to rationalize the use of violence to obtain property that others have gained via voluntary agreement. The fact that those with much property would lose more in a state of anarchy (which is an unfounded assertion, by the way; being killed by a brigand is just as disastrous for the poor as the rich, and the rich have more to trade in return for security, as long as they seek the non-murderous to trade with) does not legitimate the use of force by some to obtain what others have gained via mutual agreement, even if that force is instituted by democratic processes. Now, a reasonable case may be made that wealth transfers are defensible in some instances, given that a society in which a substantial percentage of citizens were unable to provide sufficient food or shelter for themselves, absent such transfers, is one in which anarchy or tyranny may threaten. A small percentage of the people in this country however, face such dire circumstances, particularly in light of the fact that it is state regulation of housing markets which does much to render shelter so expensive to many. A very large percentage of government activity in this society involves the forcible transfer of wealth from citizen A to citizen B, for no better reason than B having been part of a group that was more successful in lobbying elected officials. If one wishes to operate an economically inefficient agri-business, small or large, or play golf and watch daytime T.V. at age 62, instead of engaging in activity that others are willing to pay sufficiently to allow profits, one should go ahead and pursue one's desires. Just don't attempt to use state power to force others to support your pursuit.

Posted by: Will Allison on November 21, 2002 11:59 AM

Jesse makes a very good point, but it ignores the fact that if that percentage is to be reduced, a more severe rationing regime must be adopted, either using market forces, state diktat, or a combination of both. Some in this thread have posited that changes in health care will allow less expensive treatments, and if they are correct rationing will be much less painful. It is just as reasonable to posit, however, that cutting edge technology will become ever more important in prolonging productive lives, and that such cutting edge technology will continue to have extremely high marginal costs. Those faced with imminent death usually prefer to have the very best and latest care, no matter the cost, and even if such care only provides, say, a 10% greater chance of survival. Who knows? Maybe the best health care will become less expensive in the future, in which case what seems to be an intractable problem will be dealt with somewhat painlessly, or at least with a lot less pain. Otherwise, a very nasty argument awaits us.

Posted by: Will Allen on November 21, 2002 12:13 PM

" 'FICA is regressive; highpay (top 5% ?) workers don't pay their fair share,...'

Is this an attempt to claim that high pay workers don't pay more into "Social Security" than they receive back when they retire? "

No. It's an attempt to claim that all taxes of whatever source (FICA, income, capital gains...) pool to fund government functions, of whatever result (defense, road construction, national parks, old age pensions, medical assistance...)

"I don't think this an attempt to make such a claim, because I'm certain such a claim would be totally bogus."

Right. Good.

"Rather, this is an attempt to say that high paying workers should pay in enough money to cover 50 other people's retirements, rather than the 20 other people's retirements that they currently pay for. "

Well, "should" is your word, not mine. The fact remains that _IF_ the retirements are to be paid for, taxes will be collected. Soon enough, if nothing else changes, the income taxes (the majority of which collections, we are told, fall upon the rich minority of income earners) will be used to redeem the Treasury Bonds held by the Social Security Administration. So why not make the change now?

"I find this (Democratic) mentality appalling...that the rich don't pay their 'fair share.' The basic attitude is that a person's income isn't his/her own. "

As a Perot-ista, I'm inclined to resent that.
(Which presidential politician was it who first introduced this sort of budgetary line-charts into his stump speech? )

For that matter, I remember when John Anderson attempted to deal with THIS EXACT SAME ISSUE some twentytwo years ago by suggesting a 50-cents-per-gallon gasoline tax -- the collections to be earmarked (the term "lock box" not yet being in fashion) for Social Security. Even then, it was evident that FICA was insufficient to cover the outstanding promises. Both republicans and democrats spurned the unfortunate man.

We have two problems -- 1)fulfilling past promises to retirees and current taxpayers who rely on the SSA; and 2) making a new deal (and perhaps fairer deal) with those who are only now beginning to make retirement plans.

What propositions from EITHER major political party are on the table for discussion?


Posted by: on November 21, 2002 12:28 PM

A strange world, indeed, where health care is perpetually dominated by successive high-cost infant technology life-extenders, but no wellness benefits (even as retrograde technologies mature and become exponentially less expensive) ever bleed into productivity advantages elsewhere in the economy.

Posted by: RonK, Seattle on November 21, 2002 12:40 PM

Dear RonK

Please explain the interesting remark on health care technology and productivity. Is the problem here merely that of measuring the contribution of helath care improvement to productivity?

Posted by: on November 21, 2002 12:51 PM

http://www.nytimes.com/2002/11/20/health/20HEAL.html?pagewanted=print&position=top

November 20, 2002
By ROBERT PEAR

The National Academy of Sciences said today that the United States health care system was in crisis and that the Bush administration should immediately test possible solutions, including universal insurance coverage and no-fault payment for medical malpractice, in a handful of states.

Administration officials said the report would probably become a blueprint for pilot projects to be proposed by President Bush and Tommy G. Thompson, the secretary of health and human services, who requested the study.

"The American health care system is confronting a crisis," said the report, from a panel of experts appointed by the academy's Institute of Medicine. "The health care delivery system is incapable of meeting the present, let alone the future, needs of the American public."

The report cataloged the problems this way: "The cost of private health insurance is increasing at an annual rate in excess of 12 percent. Individuals are paying more out of pocket and receiving fewer benefits. One in seven Americans is uninsured, and the number of uninsured is on the rise."

Posted by: on November 21, 2002 12:54 PM

Not as strange as it may seem, Ron. If a lot of people were threatened with an imminent death if they did not obtain the most advanced microprocessor, or a vaguely observable greater chance of death some years down the road if they did not obtain the fourth most advanced microprocessor, and using that 4th most advanced microprocessor entailed inconvienience or avoidance of pleasure, a high percentage of those people might very well wait until the last moment, and then demand Intel's best.

Posted by: Will Allen on November 21, 2002 01:01 PM

It's a wonder that people would post comments here containing "facts" that come straight from Rush Limbaugh. The best example, "In 1999, the people with the top 5% of taxable income in this country paid 55.5% of the total income taxes paid! (Up from 37.1% of the total income taxes paid in 1980.)"

Notice the careful insertion of the word "taxable" before the word "income" and the word "income" before the word "taxes" - and this in a discussion of Social Security without mentionin the Social Security tax!

Notice the careful absence of any discussion of what percentage of income that top 5% receive - and in case it is brought up there's still the hedge "taxable" income. (Not to mention the percentage of wealth - the country's resources - that those top 5% possess.) And even the acidental absence of any mention of the role of corporate taxes.

Posted by: IssuesGuy on November 21, 2002 01:04 PM

'If the Clinton-Gore team had and publicized a workable plan to re-finance the debt, raise taxes, reduce benefits, eliminate spending on non-core "businesses" such as defense and justice -- I missed it.'

Paying down the debt looked like a plan to me.

'Why maintain two tax systems anyway, payroll and income? '

This is FDR's fault; he thought a payroll system would make future politicians leave Social Security alone.

Anyway, the best comment on this is Paul Krugman's:

As Joseph Newhouse, a Harvard health economist, put it, "Neither citizens nor economists . . . are especially concerned about rapid growth in most sectors of the economy, like the personal computer industry, the fax machine industry or the cellular phone industry." Yet where the growth of other industries is usually regarded as a cause for celebration, the growth of the medical sector is generally regarded as a bad thing. (Not long ago, an article in The Atlantic Monthly even proposed a measure of economic growth that deducts health care from the G.D.P., on the grounds that medical expenditures are a cost, not a benefit.) Indeed, the very phrase "medical costs" seems to have the word "bloated" attached to it as a permanent modifier: we are not, everyone agrees, getting much for all that money.

.....
Why can't we seem to keep the lid on medical costs, for older adults and for everyone else as well? The answer -- the clean little secret of health care -- is simple: we actually do get something for our money. In fact, there is a consensus among health care experts that the main driving force behind rising costs is neither greed nor inefficiency nor even the aging of our population but technological progress.


It is often argued that the share of our national income that we devote to health care cannot continue to rise in the future as it has in the past. But why not? An old advertising slogan asserted that "when you've got your health, you've got just about everything." Sterling's protagonist goes through an implausible procedure (albeit one based on an extrapolation of some real medical research) that restores her youth; who would not give most of their worldy goods for that? Even barring such medical miracles, it is not hard to imagine that some day we might be willing to spend, say, 30 percent of our income on treatments that prolong our lives and improve their quality.

Medicare's expensive? La-de frickin' da; I don't know about the other residents of the Delong argument annex, but I'm *perfectly happy* to pay lots of money to live longer, and better.

Posted by: Jason McCullough on November 21, 2002 01:44 PM

Jason,

I love you.
Ann

"Medicare's expensive? La-de frickin' da; I don't know about the other residents of the Delong argument annex, but I'm *perfectly happy* to pay lots of money to live longer, and better."

Posted by: on November 21, 2002 01:54 PM

"The proposal to completely eliminate the private sector and market discipline from health care, advocated by many Democrats and most recently by Al Gore, would make matters worse. Even if the Bush Administration does nothing to solve the problem, they are doing better than the Democrats by not adding to it."

The American people must quickly decide which medical procedures are to be covered by their public tax dollars and private insurance programs. Let nobody deceive you to the contrary: realistic limits must be imposed.

Also, our elderly must be persuaded not to completely drop out of the work force. Something is very wrong when healthy people in their mid sixties get up in the morning worrying only about whether to bowl or play tiddlywinks all day. Why can't they collect social security payments and still work? Why do we force them to become indolent?

Posted by: David Thomson on November 21, 2002 02:02 PM

We can and will continue to improve health care and extend medical insurance coverage. Medicare has been a most wonderful boon for this country.

Ann

Posted by: on November 21, 2002 02:03 PM

I don't necessarily disagree with you, Jason, and I have long felt that obsessing about what citizens voluntarily spend on health care is a little silly. The problem lies in assuming that "our income" is a wholly collective entity, or that treating it as a wholly collective entity has no net negative consequences. As long as health care is so technology driven, no society will ever be able to provide all the health care to all that would benefit from it. Rationing WILL take place, and the greater the share of income that health care technology consumes, the more stark such rationing choices will be.

Posted by: Will Allen on November 21, 2002 02:08 PM

Ann, Medicare may or may not be a most wonderful boon to this country, but it is not a model for overturning the inevitability of scarcity, particularly in how scarcity applies to goods and services that are technology-driven. No matter how the health care market is organized, regulated, or completely taken over by the state , somebody is going to have to do without care that they would benefit from having.

Posted by: Will Allen on November 21, 2002 02:18 PM

There seems to be two kinds of medical innovations -- the truly effective and relatively cheap, such as vaccines, and the extraordinarily expensive innovations that provide less clear cut results, like the newest near photo qualify sonograms for pregnant women. It's also generally true that the more medical providers you have in a particular area, the greater the overall medical costs, because doctors have a way of creating their own demand. Bring a lot of knee surgeons into a community, and, one way or another, a lot of knees will end up being cut. Medicare can do more to reign in costs, and it can also give people a choice. You get your basic coverage from Uncle Sam, and if you want something truly radical and expensive, use your own funds.

Posted by: pj on November 21, 2002 02:37 PM

Strange, indeed, Will. We have a major body of technological improvement -- moving the efficient frontier out beyond the visible horizon -- and our preferences lead us to apply 100% of the potential windfall gain to stretching our death-bed days, and 0% to making the primes of our lives more productive and/or more hedonically utile?

What sort of rational self-maximizing entities would ever settle for such an equilibrium?

Posted by: RonK, Seattle on November 21, 2002 02:45 PM

I dunno, bone-marrow transplants are pretty damned expensive, and there are more than a few people who would vehemently claim that those transplants are the only reason they aren't mouldering in a grave.

Posted by: Will Allen on November 21, 2002 02:47 PM

Rationality, like beauty, is in the eye of the beholder. It may seem entirely irrational to be a glutton and fail to exercise, unless one decides that gluttony is by far the the most pleasurable activity in life, and that exercise the most odious. Before you know it, an insurance company is shelling out tens of thousands for bypass surgery, or, north of the border, the glutton is waiting a lot longer for the procedure, and hoping he doesn't seize up in the interim.

Posted by: Will Allen on November 21, 2002 03:32 PM

'Rationing WILL take place, and the greater the share of income that health care technology consumes, the more stark such rationing choices will be.'

This implies there's limits on how much health care there is to go around. I mean, sure, you obviously can't spend 99% of GDP on health care, but why not 50% or even more, if society's members think its worth it?

We don't talk about rationing cars; if we want more cars, or any other good, we just switch around our goods basket. The only difference between buying more cars and buying more health care is that the government engages in income transfers and risk-pooling in the health care market.

If we end up spending 20% of GDP on Medicare and Medicaid it'll be a *quantitative* change, not a *qualitative* change. The fundamental nature of the market won't change a whit. Now, single-payer, managed-care, and prescription drug benefits are qualitative changes, but that's a different bird.

Actually, now that I read your comment again:

''Rationing WILL take place, and the greater the share of income that health care technology consumes, the more stark such rationing choices will be.'

So spending more money on health care results in.....ever starker rationing choices? Where does all of this cash go?

'Before you know it, an insurance company is shelling out tens of thousands for bypass surgery, or, north of the border, the glutton is waiting a lot longer for the procedure, and hoping he doesn't seize up in the interim.'

Ignoring the public funding aspect of this, I don't think it's our business if someone wants to alternate filling and emptying their arteries on their own dime.

Posted by: Jason McCullough on November 21, 2002 03:58 PM

We had Richard Clarida, assistant sec of treasury for economic policy, on campus this week. He assures us that the administration is on the right track.

Posted by: Dennis O'Dea on November 21, 2002 04:20 PM

>>> Medicare's expensive? La-de frickin' da; I don't know about the other residents of the Delong argument annex, but I'm *perfectly happy* to pay lots of money to live longer, and better. <<<

I'm sure that everyone in the world is perfectly happy to have you spend lots of your money to live longer and better.

But the day may come when people who are younger than you and who are working hard just to make ends meet and raise their kids, upon seeing that you have not provided for your own medical care with insurance and savings and the like, may not be very happy with the idea that you are entitled to spend "la-de frickin' da" lots of their money so that you can live longer and better.

And they may outvote you.

>>> ....our preferences lead us to apply 100% of the potential windfall gain to stretching our death-bed days, and 0% to making the primes of our lives more productive ... What sort of rational self-maximizing entities would ever settle for such an equilibrium? <<<

Rational self-maximizing entities whose prime-of-life years are behind them, of course.

And to the extent they are a voting group with influence at the margin, they will impose their choice on the rest of the polity -- too bad for everyone else, for as you say it's hardly the maximizing policy for society as a whole. Or, to the extent they lack influence at the political margin, their own desires will be frustrated. It's all that voting again.

Of course, this is assuming medical services are directed by the government rather than by the market. It's the sort of thing that happens when politics directs the use of resources.

Posted by: Jim Glass on November 21, 2002 05:15 PM

'But the day may come when people who are younger than you and who are working hard just to make ends meet and raise their kids, upon seeing that you have not provided for your own medical care with insurance and savings and the like, may not be very happy with the idea that you are entitled to spend "la-de frickin' da" lots of their money so that you can live longer and better.'

Complaining about the generational transfer nature of the current system is perfectly reasonable, although I'm not sure I follow how it's so bad. GDP growth tends to dominate population growth, so each generation should get roughly the same amount of benefits, right?

'It's the sort of thing that happens when politics directs the use of resources.'

If it bothers the young so much, why don't they vote against social security, medicare, and medicaid? For that matter, why don't they vote?

Posted by: Jason McCullough on November 21, 2002 05:38 PM

Dear me, the squirrels are crawfishing away from the challenge, and the whole thing is drifting badly off-topic.

Once again -- and freely granting that some of the expanded production function advantage gets applied to marginal life-extension -- what is your argument that all of it gets applied to marginal life-extension?

Are ALL voting retirees on resuscitation? No. Could ANY non-retirees voluntarily apply health tech to enrich and en-joy themselves? Yes. Could the death-bedders stop them from doing so (under either market or "public choice" disciplines)? No. Would they do so if they could? No, that reduces the quantity of health care (and everything else, produced by pre-retirees) available to death-bedders and/or their livelier retiree predecessors.

And "rationality is in the eye of the beholder"? If this rationality of yours has no objective attributes, I hope you will not bother us further with argumentative resort to its claimed virtues.

For what it's worth, I have found little evidence -- in a relatively rich anecdotal life -- that people in general will pay outlandish prices (financially or procedurally) to win marginal increments of longevity, and much evidence to the contrary.

Posted by: RonK, Seattle on November 21, 2002 06:06 PM

Er, probably I shouldn't poke my head up here, but you people do know that there's a difference between a health care system and a health care payments system, right?

The USA has an excellent health care system, beyond doubt the best in the world. It has an abominably unfair, wretchedly inconsistent and unreasonable payments system.

A single-payer system such as we have up north (which I'm not claiming to be ideal, mind), is basically nothing but a very large group health insurance policy that covers everyone in the country. Like all group insurance, it is significantly cheaper per person covered than any individual insurance can be, because there are no anti-selection forces at work.

The administrative costs are actually a lower percentage of the expenditure on health care. Doctors also get paid faster... I don't think it's because we Canadians are magically better administrators than Americans. It's just that, well, a simpler structure turns out to require less administration.

It seems to me that a lot of the gut-level opposition to your Medicare arises precisely because it doesn't cover everyone. People don't see any benefit in it for themselves. Their own heath-insurance costs are soaring alarmingly, so why should they have to pay taxes as well to support other people's medical expenses?

When coverage is universal, this "what's in it for me?" objection vanishes. Everyone benefits, so everyone (or at least, an very large majority) supports the plan.

Waiting periods. Ah yes, well, that is a problem.

Not, however, because demand is ballooning unreasonably; it isn't. That's a ridiculous bogeyman; even when a doctor's visit doesn't cost any money, it still costs time and inconvenience. People don't do it frivolously. (They do take their sick kids, though, which we want them to do because it helps out so well with that infant mortality business.)

Right now there are not enough expensive devices such as MRI machines, because in the 90s our government was forced to cut back on social services of all kinds to pay down an out-of-control deficit. Now, that has been done, the national finances are in fairly good shape, and people are saying it's time to put more funding into health care.

Bottom line: we have the level of basic health care that the nation can afford. But at least we all have it. You're richer than we are. You could have a much higher level of care than we do, if you wanted to. Better for everyone.

Posted by: Canadian Reader on November 21, 2002 06:23 PM

Jason, we don't talk about rationing cars because it happens in such a decentralized fashion that it appears to be done with that hoary cliche', the invisible hand. If you doubt this, walk into your nearest Mercedes dealership and demand a 500 in the same way you can walk into your nearest County Hospital Emergency Room and demand treatment for your broken leg. I assure you, the wait for the Mercedes will be considerably longer than the ER wait that many complain about. Actually, there is a limit to how much can be spent on health care, particularly health care that requires the best technology, since the supply of the very best technology is extremely limited at any price, and the greater the number of people who are willing and able (ability only limited by the taxpayer under some regimes) to buy such scarce health care simply drives the price ever higher. Unless, of course, the state coercively limits supply and controls prices. Welcome to Canada. I understand that many beleive such a rationing regime is superior when it comes to the distribution of something as essential and scarce as health care, but we shouldn't fool ourselves that central planning in the distribution of health care won't be subject to the same inherent problems as central planning is in the distribution of other goods and services.
As to each generation getting the same amount of benefits, well, without even going into that assertion, it must be noted that this reasoniong only applies if you see people as undifferentiated masses, and not as individuals. The healthy 50 year old who is killed instantly in a car accident gets the priviledge of subsidizing the comfort of the 75 year old, prior to being compacted by a tractor-trailer. Is it unreasonable to ask the 75 year old to do EVERYTHING possible to help himself, including, God forbid, working while physically able, before dipping into the wages of our soon-to-be- compacted 50 year old? This may sound harsh, but having had a Grandmother who insisted on working until age 84, when her eyes finally failed completely, despite many other health problems, I don't have a lot of patience for healthy 70 year olds who want to watch CNBC while somebody else supports them.

Posted by: Will Allen on November 21, 2002 06:41 PM

"Welcome to Canada."

(grin) Will, you say that like it was a bad thing.

Age wouldn't come into it if you guys didn't restrict Medicare to the over 65 age group.

As for the healthy "subsidizing" those who use care: hey, that's insurance. It's the fundamental nature of insurance, the essence, the principle, the sine qua non. It's called spreading the risk.

"...we shouldn't fool ourselves that central planning in the distribution of health care won't be subject to the same inherent problems as central planning is in the distribution of other goods and services."

Do I detect a jerking knee, here? Single payer is not the same thing as central planning. And Canada and the UK do not have anything like the same system! It's important to make that distinction before you can even begin to discuss the question sensibly.

Posted by: Canadian Reader on November 21, 2002 08:11 PM

Canadian Reader should not forget that America is paying the big bucks to defend their country. It's time that Canada pulls its weight. Our tax payers are indirectly picking up a lot of their medical bills.

Posted by: David Thomson on November 21, 2002 08:33 PM

David, what threat are we defending Canada against? Angry polar bears?

'As to each generation getting the same amount of benefits, well, without even going into that assertion, it must be noted that this reasoniong only applies if you see people as undifferentiated masses, and not as individuals. The healthy 50 year old who is killed instantly in a car accident gets the priviledge of subsidizing the comfort of the 75 year old, prior to being compacted by a tractor-trailer. Is it unreasonable to ask the 75 year old to do EVERYTHING possible to help himself, including, God forbid, working while physically able, before dipping into the wages of our soon-to-be- compacted 50 year old? This may sound harsh, but having had a Grandmother who insisted on working until age 84, when her eyes finally failed completely, despite many other health problems, I don't have a lot of patience for healthy 70 year olds who want to watch CNBC while somebody else supports them.'

So you're against risk pooling in general? If you want to repeal the existing social programs, by all means, campaign away, but I fail to see the relevance to this discussion.

Posted by: Jason McCullough on November 21, 2002 10:27 PM

While I may be oversimplifying, it seems to me that the comments on this thread all simply end up converging on one elementary set of basic principles for dealing with Social Security and/or Medicare deficits:

(1) Raise taxes for them on the well-off.
(2) Lower benefits from them to the well-off.
(3) Raise the retirement age for ALL healthy people.
(4) Make sure that supposedly competitive health providers don't engage in conspiracies in restraint of trade.

Either these things will end up being done politically or they won't (although they certainly won't be done if no one continues correctly screaming about the need for them).

As for Mark Bahner's arguments: they're straight out of the Twilight Zone. "A true "fair share" would be paying taxes for *nobody* else's retirement. The Constitution doesn't permit Congress to take money from one group, to give to another (for no service rendered)." Really? Then it's unconstitutional to force the richest American to pay any more total amount in taxes than the poorest American. I rather doubt this is what the Founders had in mind, and certainly the courts don't think so, since the Constitution is not a suicide pact. And as for his "moral" argument that "I find this (Democratic) mentality appalling...that the rich don't pay their "'fair share' ", and that their "basic attitude is that a person's income isn't his/her own": are we actually supposed to believe that someone who earns $300,000 per year does so by working 10 times harder each day than someone who earns $30,000 per year, and that it's therefore unfair to tax his income at a higher rate? If so, what the hell would be the purpose of trying to become richer in the first place?

Not that Will Allison does any better by arguing that -- if you allow taxes at all -- there's always a good chance that they will be unfairly levied depending on who has the most political clout. No kidding. But as long as the rich are relatively few in number, they will always be levied disproportionately on the rich -- exactly as they should be.


Posted by: Bruce Moomaw on November 22, 2002 04:17 AM

"David, what threat are we defending Canada against? Angry polar bears?"

The Unites States spent the serious dollars to defeat the Soviet Union. Canada parasited off us during that time period. Are Saddam Hussein, Osama bin Ladin, and the rest of the Islamic militants angry polar bears? It's time for Canadians to pull their weight. This also goes for our European allies. Americans should hold these nations in utter contempt.

Posted by: David Thomson on November 22, 2002 05:47 AM

Canadian Reader: I don't think you've made your point about a distinction between a health-care system and a health-care payment system. We are discussing health care economics here, not health care itself shorn of economic considerations. A single-payer system would have many (not all) of the characteristics of a centrally-planned system.

Posted by: JT on November 22, 2002 06:23 AM

Ron, sorry to have to belabor the obvious, but my point regarding rationality was that in order to determine whether someone is acting rationally, one must first understand that everyone does not value the same attributes equally, therefore it is a mistake to call someone irrational simply because they pursue goals that others would not. Hence, some people are obese and lead sedentary lifestyles, and others are obsessive about eating and exercising to extend their lives. It really is the same as your anecdotal experience that people will not pay outlandish prices for incremental extension ot their lives; the point is some will, some won't, and neither can be said to be acting irrationally. However, it must be noted that we don't really know what most people are willing to pay for marginally life-extending health care at the end of their lives, since the patient at this point isn't "paying" for it, everyone else is. If you talk to people who work in health care for the elderly, they will tell you that behavior in this area runs the gamut, some people will pursue treatments no matter the chance of success, and others will not. My grandmother, who I spoke of above, was not ready to die at age 91, and she her medical bills in the last 6 weeks of her life ran into several hundred thousand dollars. Was this a waste? One can't answer the question without first defining what one's goals are. My grandmother's goal was to extend her life as long as possible, whereas others would have no doubt stopped treatment much earlier, and both decisions are entirely rational, based upon what those individuals value.

Posted by: Will Allen on November 22, 2002 07:28 AM

"As for the healthy "subsidizing" those who use care: hey, that's insurance. It's the fundamental nature of insurance, the essence, the principle, the sine qua non. It's called spreading the risk."

You're missing a vital aspect of insurance. The expected cost of insuring you is a function of the expenses covered and the likelihood that you will incur those risks. Now the level of risk is different for different people - a group of older people will be more expensive to insure than a group of younger people, for instance, and a group of smokers will be more expensive to insure than a group of non-smokers of the same age.

If you declare by fiat that all people will pay the same rate, then you are simply subsidizing the higher-risk people at the expense of the lower-risk people. This means that (a) the lower risk people don't actually benefit from this arrangement, and will only hold still for it if they are compelled to by law (or if, as in this country, the tax code leads to some of them being compensated for providing the subsidy), (b) people in general lack incentives to lower their risk, and the group as a whole becomes more expensive to insure, and (c) people all have (and pay for) the same level and types of coverage, regardless of their needs and desires.

Not that the system in the US is anything to write home about. Here, the tax code strongly encourages employees to join a "group health plan" that has all of the essential shortcomings described above.

Posted by: Kenneth Uildriks on November 22, 2002 07:29 AM

Thanks, Kenneth for a good synopsis of insurance principles; it is a subject that is often misunderstood. I did not mean to imply that the Canadian system was "bad", I simply pointed out that a single payer system does entail aspects of central planning, and therefore it will be subject to some of the shortcomings of central planning, just as a mythical free market in health care would be subject to the shortcomings of markets. Unfortunately, people on all sides of this debate erect strawmen; they declaim , "Your proposal does not achieve perfection!" as if that is a worthwhile critique, and ignoring the shortcoming of what they advocate. Jason, I simply made a rather modest proposal; that people do everything they can to provide for their health care, including working while physically able, before asking others to support them. A revolutionary concept, to be sure, but hopefully it isn't too offensive. Finally, Mr. Moomaw confirms what I have long suspected about many democratic statists; that they fundamentally believe that the use of coercive force is morally legitimated solely by whomever has the larger faction. Essentially, this is a might makes right philosophy, disguised within the framework of democratic processes.

Posted by: Will Allen on November 22, 2002 07:56 AM

Sorry to have started such a raging argument, then disappeared for two days. But I wanted to respond to two things that were said:
Kenneth Uildriks writes that "The expected cost of insuring you is a function of the expenses covered and the likelihood that you will incur those risks. Now the level of risk is different for different people - a group of older people will be more expensive to insure than a group of younger people, for instance..." But the likelihood that we will become old does not vary substantially across the population. There are certainly types of insurance that insure across time rather than across people at a point in time. It wouldn't be unreasonable to think that there would be a market for insurance that charged a constant premium over the life cycle, if people could be assured that the company offering the insurance wouldn't drop the policy when they turned 65. Yes, it means the young subsidizing the old, but since we all hope to be old, that isn't so bad. It may well be that government provision is the only way to make the contract enforceable over a sufficiently long time period, however.

On another point, Will Allen (long ago) wrote that "if that percentage is to be reduced, a more severe rationing regime must be adopted, either using market forces, state diktat, or a combination of both." Well, yes. But the point is that market forces will accomplish it for certain, unless the state takes over the health system entirely, in which case state diktat will do it. The long-run problem is that projections assume that our demand for health care is so insatiable that we will continue to demand more to the exclusion of all other goods. It won't happen. Sometime before health insurance premia exceed the total output of firms, they will stop offering health insurance as a benefit. If medical technology continues to improve in the form it has taken in the past, operating purely on the extensive margin with very little reduction in costs of existing procedures, the market will (long before 2075) force us all to acknowledge that we can't have the very best medical care that exists. What I object to is blaming that on the government--yes, a single payer system will have to ration care more severely than our current system does (for the rich, anyway), but a pure market system would have to as well.

Posted by: Jesse on November 22, 2002 10:54 AM

I am largely in agreement with you; my objection is primarily with those who criticize the current regime, which admittedly is awful in many respects, without clearly recognizing that the regimes they favor will inevitably entail denying health care to those who would benefit from receiving it. I don't think central planning produces very good results, and to the degree that a single payer system will inevitably include central planning, I oppose a single payer system, particualarly since the single payer systems throughout the world today are able to free-ride on the more market oriented system in the U.S.; they get some of the benefit of profit seeking innovation in the U.S., but don't have their consumers pay prices consistent with such profit-seeking. No, I don't have any pain free, or even pain minimizing, solutions to offer, because none exist. I think it was conumdrums such as this that fostered economics' reputation as being a miserable science.

Posted by: Will Allen on November 22, 2002 11:52 AM

'If medical technology continues to improve in the form it has taken in the past, operating purely on the extensive margin with very little reduction in costs of existing procedures, the market will (long before 2075) force us all to acknowledge that we can't have the very best medical care that exists.'

Huh? Extensive margin or no, quality of life and lifespan have increased markedly. I fail to see how a continuation of this trend will force us to give up. Some of the costs are due to the mess of an insurance system we have, sure, but they're pretty much a constant proportion of expenditure; I'm totally not following your argument.

Posted by: Jason McCullough on November 22, 2002 12:11 PM

A brief note of perspective ... approximately the entire past of health care has been based on guessing what's going on in a human body, and approximately the entire future of health care will be based on knowing what's going on in a human body.

If technology improvement were confined to diagnosis alone (no improved therapies), and these improvements followed traditional new tech and mass market cost reduction curves, we would expect radical overall cost-benefit improvements.

Would health care then occupy a greater or a lesser share of our market basket? Cannot be strictly determined from the information given, but it seems likely we will invent new therapies and more accurate diagnoses faster than we invent new maladies.

In this connection, please note "health care" is in unit demand only to the extent it mitigates some particular individual misfortune ... it is not a primary good like, say, units of "bagpipe music" (for which all rational actors are necessarily insatiable in varying ratios of exchange for units of, say, "brie").

Posted by: RonK, Seattle on November 22, 2002 12:59 PM

Most of the gains in lifespan were from picking what is now considered low-hanging fruit; antibiotics, vaccines, public sanitation. Predicting the future of technological improvement is a notoriously futile exercise (see past predictions of the impossibility of any number of subsequently achieved technological break-throughs), but it is not unreasonable to think that to achieving further extensions in lifespans that are comparable to those achieved by antibiotics, vaccines, and public sanitation will be, on a real basis, far more expensive. Of course, we are far wealthier, but if wealth devoted to health care is seen solely as a collective entity, and health care technology becomes sufficiently expensive, then tax rates sufficient to pay for that collective good may threaten economic stagnation. Hence, rationing by government diktat, which entails economic problems also. Again, this is mere speculation; perhaps we are on the verge of relatively inexpensive technology developments that will extend productive lives as cheaply as penicillin did. That doesn't seem to be the trend, however.

Posted by: Will Allen on November 22, 2002 01:03 PM

(cough) Once, when I was two years old and my mom caught me raiding the sugar cube bowl, I tried to divert her attention by saying brightly, "Shirt, shirt!" This became a family saying for the transparent introduction of an irrelevancy in an attempt to distract.

In other words, David, what on earth does the cold war have to do with the subject under discussion?

Although... since you bring the subject up, the whole point of NORAD and the DEW line was to shoot down any incoming transpolar bombers or ICBMs over Canadian territory before they could get near any American targets. Since most of our population lives within 100 miles of the US border, our government agreed that this was mostly a pretty good idea and would indirectly protect us, too, though the Cree and Inuit and the people of Edmonton were understandably not so sure about it -- but it's not like there was a whole lot of altruism involved on the American side.

Kenneth: If you are doctrinally opposed to group insurance, you will no doubt be shocked to learn that even individual insurance involves being placed into a premium band by the insurance company. You can't have insurance at all without some risk pooling. This applies to all forms of insurance: life, health, disability, home, auto, you name it.

Here's the thing, though... risk pooling is to your long term advantage. If you are now young and healthy it may not look that way to you, but unfortunately, the only way yet discovered not to grow old is to die young. Plan to grow old; if you do, you'll be grateful for your earlier prudence. If you don't, any concerns you might still have will be in the realm of theology, not economics.

Your chance of incurring high medical bills rises as you age. So does the chance that you will acquire a medical condition that prevents you from continuing to earn an income. It thus becomes more and more probable as you get older, that your medical expenses will exceed your ability to pay. This is the disaster you need to insure against... but if premiums are gauged to exactly match the risk for each individual, you will not be able to afford insurance, either. Let me put it more strongly: if premiums are gauged to exactly match the risk for each individual, there is no insurance.

Insurance companies set their rates using actuarial tables, plus of course a margin for adminstration and profit. Group insurance is cheaper per person than the exact same people insured individually, because there's less administration. National single-payer insurance is cheaper yet, because the system is not expected to make a profit.

Note that this last point is true for any kind of insurance, not just health insurance. The province of Manitoba has single-payer provincial auto insurance, too (financed by premiums, not taxes), which has, over the last, hmm, more than two decades, consistently managed to offer residents massively lower rates than private companies in the rest of Canada.

I spent eighteen years writing programs for a major insurance company; the basic principles of insurance did soak in.

Here's a thought thrown out for discussion. One way any American single-payer plan would likely differ from the Canadian one is that it would also have to address the problem of malpractice insurance. There needs to be a remedy for bad doctoring, but the current scheme is not only driving up health care costs, it's chasing good doctors out of important specialties, and providing a perverse incentive for over-testing.

Posted by: Canadian Reader on November 22, 2002 01:05 PM

Ron, I hope you are correct, for it will render much of this debate moot. I look forward to the future Ray Krocs of health care, becoming billionaires by providing clogged drive-through lanes, under a banner reading "15 billion cured".

Posted by: Will Allen on November 22, 2002 01:12 PM

Canadian Reader, to clarify, are you saying that you, as an insured, would rather be part of a risk pool that did not exclude higher risk individuals than part of a risk pool of equal size that did? Also, is it your contention that the profit motive inhibits efficient delivery of insurance services? If this is so, why has the profit motive proven to be a facilitator of efficiency in the delivery of other goods and services?

Posted by: Will Allen on November 22, 2002 01:25 PM

Jason writes: "Extensive margin or no, quality of life and lifespan have increased markedly. I fail to see how a continuation of this trend will force us to give up. Some of the costs are due to the mess of an insurance system we have, sure, but they're pretty much a constant proportion of expenditure; I'm totally not following your argument."

I'm not arguing that there haven't been, or won't be, health care improvements. We will almost certainly be substantially wealthier in 2075 than we are today, and probably in better health as well. (We, of course, has to mean we as a society; personally, I don't expect to be in very good health at all in 2075.) We will almost certainly spend more, in real dollars, on health care than we do today, and get much better care per dollar for that money. My point is simply that if the cost of care at the technology frontier continues to grow faster than the rate of GDP growth, at some point either we will have to provide a smaller fraction of that "technology frontier care" to the average person, or we will end up spending more than our total income on health care.

Which brings me to one of Will's points. Yes, many of the past breakthroughs in medical care have been low-lying, cheap fruit like vaccines, etc. But that's not what arguments about cost containment are about; only a tiny fraction of health care expenditures go for things like that. An awfully large share of the pie goes to end-of-life care--transplants, life support, etc. Hopefully, some of technological progress over the next century will go toward making this sort of care less expensive, rather than toward devising new, even more expensive procedures to replace these, but past experience doesn't offer much support for that hypothesis.

Posted by: Jesse on November 22, 2002 02:03 PM

Couple things.

1. The mandatory, province-wide Manitoba Auto Insurance program is interesting. It avoids the "moral hazard" risk within the province by forcing EVERYONE into the plan. Of course, if every single person pays the same rate regardless of accident incidence rate then it's probably not a good deal for good drivers, but still interesting. What COULD happen in a frictionless society is that Manitoba would become a magnet for bad drivers from all over Canada. Except of course, who really wants to live in Manitoba? Better have a good program in place to catch the liars, though, especially around the provincial borders.

2. Tort reform is one of the top five issues facing America - not just in medical malpractice but also in runaway class actions in commercial and industrial sectors such as asbestos, tobacco, lead paint and breast implants. To get a sense of the present ridiculousness, if two different jury awards in tobacco are ever upheld through the end of the appeals process, the lawyers trying the case will immediately jump into the top 100 Wealthiest Americans List in Forbes. Or in asbestos litigation, every study done has shown that more than half of every dollar of compensation paid out went to . . . . . . lawyers, not the victims. Best of all, regarding breast implants, there is NO, I repeat NO scientific evidence whatsoever that any woman ever got sick from breast implants. Which is not at all the same thing as no woman with breast implants ever got sick - many did - but not out of proportion with their demographic cohort. Oh well, I digress. Tort reform in health care is critical but no one has an answer.

3. Last, there's a couple of totally bizarre things about U.S. health care that ought to be addressed. Most importantly, the employee benefit of health care insurance should not be free from taxation - in fact, it shouldn't be bought or distributed at work, either. Overusage of health care as well as "pooling" issues restricting availability both derive from the tax and employer boondoggles. [The reason 30% of American can't afford health insurance is because they can't get it tax-free at work, and the 30% of Americans as a cohort who can't get it tax-free at work are a TERRIBLE health care risk].

The other odd issue is the money and resources commited to very, very premature infants and to the elderly in their last year of life. More than half the health care dollars in the U.S. are spent in these two categories. No other nation does this. Preemies, I'm not gonna touch. A part of the problem with the elderly in the last year of life is that you never know prospectively when the last year is. But there's enormous savings in intelligently reducing the health care spent on patients who are clearly dying.

Posted by: Anarchus on November 22, 2002 02:07 PM

'My point is simply that if the cost of care at the technology frontier continues to grow faster than the rate of GDP growth, at some point either we will have to provide a smaller fraction of that "technology frontier care" to the average person, or we will end up spending more than our total income on health care.'

Ben Stein's line comes to mind : "if something cannot go on forever, it will stop."

Anarchus: do you have sources for those numbers (legal costs being a worrying fraction of health care expenditures, half of medical resources spent on the first and last year of life)?

Posted by: Jason McCullough on November 22, 2002 02:18 PM

I would rather be part of a group that does not exclude higher risk individuals, for two reasons:

1. I know that through no fault of my own I may at any time become one of those higher-risk individuals. I'm willing to pay more while I am at lower risk, for the assurance that I will not in the future be thrown out and excluded from the group at the very moment when I most need coverage.

2. As a member of society, I benefit in a large number of ways from living in an environment where other people are not being forced into desperation through having been excluded from coverage.

Does the "profit motive" inhibit efficiency? No, but in real live experience as opposed to market-fundamentalist dogma, it is often pretty much orthogonal to efficiency. There are highly inefficient profit-oriented companies -- I've worked for several. Think Dilbert. And there are plenty of quite reasonably efficient public service organizations, because profit is not the only way to reward efficiency. Believe it or not (and I'm thinking of Manitoba's Autopac here), political pressure to keep the premiums down seems to work wonders.

And, to belabor the obvious, when comparing two organizations with equal administrative costs, the one that is not required to turn a profit is clearly able to offer a lower price for its services than the one that must add a margin for profit.

The profit motive works to promote efficiency in proportion to the degree to which actual market conditions resemble a theoretical competitive marketplace, that is to say, not even close to all the time.

Posted by: Canadian Reader on November 22, 2002 02:19 PM

Canadian Reader, after re-reading your post, I see that your comments regarding risk pools pertained to two IDENTICAL sets of individuals, so I strike my first question to you. I have some others, however: do you think it is possible that Canadians have derived great benefit from drugs that were developed due to the potential of great profits to be earned in the U.S., and that Canadians doubly benefit when they are able to obtain these same drugs at controlled prices? If the U.S. were to adopt a similar regime, might not Canadians lose these very valuable benefits? Do not Canadians also benefit from being able to access other health care supply in the U.S., supply that that the single payer is unwilling to maintain? In other words, does not a single payer system for a much smaller population gain great benefit from being immediately adjacent to a wealthier, and larger by several magnitudes, population, which through a different, and also imperfect regime, creates far more supply, per capita? Does not this relationship make it very difficult to discern the relative superiority of one regime to another, in terms of delivering the highest level of service to the widest number of people?

Posted by: Will Allen on November 22, 2002 02:25 PM

Canadian Reader, I see you answered my first question anyhow, so I would point out, as you surely know, that there are types of private insurance, although not typically health insurance, in which the insurer is contractually prevented from expelling an insured from a risk group, and that have sufficiently large classes to prevent the sort of weeding out via premium increases that so many private health insurers engage in. Typically, of course, this sort of insurance covers hazards that are more predictable in cost. In any case, it was not my position that private comapanies or markets are perfect; only that, on average, private entities are more easily cut off from further capital than politically controlled entities, once they become too inefficient. True, monopolies can often avoid this cutoff as well as politically controlled entites, which is an argument to foster competition, not to do away with private firms.

Posted by: Will Allen on November 22, 2002 02:40 PM

At the risk of excessive add-ons, a further comment. Your comparison of two organizations with equal administrative costs, one profit seeking, one not, assumes stasis in the type of services or products to be delivered. Once innovation in quality of product is factored in, the profit seeking organization, again, on average, will tend to deliver a much higher quality service. This pertains to our discussion in that it is quite reasonable to believe that much medical technology development takes place due to the potential of great profits in the U.S.; profits that are much harder to obtain elsewhere, and therefore may not take place at all if not for the U.S. market.

Posted by: Will Allen on November 22, 2002 02:53 PM

Anarchus: Yes, the Manitoba case is interesting as a counter-example to those who think single-payer is inherently required to be a wasteful government boondoggle.

It avoids the "moral hazard" risk within the province by forcing EVERYONE into the plan.

Yes. Er, well, everyone who wants to drive, that is. You can't get a Manitoba license plate for your car without paying the Autopac premium.

Of course, if every single person pays the same rate regardless of accident incidence rate then it's probably not a good deal for good drivers, but still interesting. What COULD happen in a frictionless society is that Manitoba would become a magnet for bad drivers from all over Canada.

In fact Autopac does set different rates for different drivers, just as any private insurance company does. No-one is uninsurable, unless they've had their driver's license yanked by a magistrate, but good drivers do get a fairly deep discount.

Except of course, who really wants to live in Manitoba?

Well, there is that. (grin)

Better have a good program in place to catch the liars, though, especially around the provincial borders.

Take a look at a map. Not a lot of population density, there... It wouldn't be a problem anyway, because of the license plate linkage.

Posted by: Canadian Reader on November 22, 2002 02:54 PM

Anarchus (and, in follow-up comments, Canadian Reader), I think you mean "adverse selection," not "moral hazard." Moral hazard would be if people who know they are insured take more risks while driving, because they don't bear the full cost of accidents. (Or, more realistically, if they don't exert as much effort to avoid theft.)

Posted by: Jesse on November 22, 2002 03:43 PM

Bruce Moomaw writes, "As for Mark Bahner's arguments: they're straight out of the Twilight Zone. "A true "fair share" would be paying taxes for *nobody* else's retirement. The Constitution doesn't permit Congress to take money from one group, to give to another (for no service rendered)." Really?"

Yes, really! To quote the man recognized as the "father of the Constitution" (note to Mr. Moomaw, that would be James Madison ;-)):

"I cannot undertake to lay my finger on that article of the Constitution which granted a right to Congress of expending, on objects of benevolence, the money of their constituents...."

It's truly remarkable that a fundamental Constitutional precept would be categorized as "straight out of the Twilight Zone" by someone who I presume is a U.S. citizen. No doubt, Mr. Moomaw was educated in public schools. ;-)

Mr. Moomaw continues, "Then it's unconstitutional to force the richest American to pay any more total amount in taxes than the poorest American."

That doesn't logically follow from my statement at all. (Further evidence that Mr. Moomaw was educated in public skools? ;-))

What I said was the that it's unconstitutional for Congress to take money from one group of people, to give to another group, for no service rendered. The Founding Fathers recognized that our country would unfortunately have many people who would rather vote to have someone give them money, rather than work themselves. That's why the required that ALL tax moneys be spent only on items that were for the "general welfare of the United States." As Madison's sarcastic remark notes, there is no more egregious violation of that principle, than taking money from some people, and giving it to other, *for no service rendered*. (Did that phrase even reach Mr. Moomaw in his own Twilight Zone?)

But even beyond that, there is no mention in Article I, Section 8 (hint: that's where such a mention would be found) of Congress raising taxes for peoples' retirements. That's why it took a man for whom the Constitution was toilet paper, FDR, to push through "Social Security."

Posted by: Mark Bahner on November 22, 2002 03:52 PM

Will, I thought the subject was the health care payments system, that is, the means of writing the checks to health care providers. We are talking about HMOs and insurance companies, here, not the providers of care.

Frankly, I've been there. I've watched. There is just not a lot of scope for technical innovation in how you pay the bills. Well, okay, there is, but the advantage is all with the single payer scheme. The doctor, the hospital, the labs, all submit one itemized bill each month to one place, and get paid right away. Because there's a single well-known interface, there is inexpensive software available to manage this billing. It's quite efficient.

I think you might have been confused by the fact that, like any HMO with sufficient size to have the leverage, the single-payer is able to exert pressure to hold down prices. It can, in fact, define a list of services, and the rates that it will pay for those services. If you have a problem with the Canadian government doing this, then you must equally be objecting to the larger HMOs doing the same thing, no?

As to the question, does Canada benefit from the current state of the US health care system? Well, yes, no doubt about it, in some ways it does. We're going to remain geographically next to you and much smaller than you, whether either of us likes it or not, and if you do things differently from us we have to adapt to the fact as best we can.

There are some downsides to the situation as well, but... on the whole we would far rather that you went your own way and never once glanced north or considered adopting our system at all. The status quo is okay with us. When I heard that the subject had been mentioned in the US again, my first reaction was to groan.

You see, the last time you guys had this argument, there was a lot of... how can I say this politely... deliberate and malicious lying about our system. The propaganda campaign succeeded in its primary purpose of convincing unwary American voters that Canada's health care system was in an awful state, unaffordable, inefficient, out of control, a horrid disaster in process.

In reality, it had been working quite well. However, the noise backwash over the border had the unfortunate side effect of convincing not a few Canadians that our health care costs were insupportably high. (sigh...) It did a lot of damage, that did. I'm not looking forward to a repeat performance.

So I'm not trying here to persuade you to adopt our system. I'm just speaking up to counteract some of the misconceptions. If you are going to debate the idea of a single-payer system, debate a real one, not a false construct. Okay?

Please...?

Posted by: Canadian Reader on November 22, 2002 03:58 PM

It isn't a false construct to say that a payment system that inhibits the profits to be made on technological innovation may well inhibit the amount of capital directed to produce such innovation, and thus reduce innovation overall. It doesn't bother me that Canadians benefit from innovation derived from profit opportunities in the U.S., I merely contest the notion that absence of profit opportunity does not eventually have a net negative impact on consumers. Canada benefits greatly fron being adjacent to a nation in which large profits can be made from new medical technolgy, since Canada is then able to adopt a payment system which affords far less supply of such technology (excess demand can cross the border) or because technology providers are willing to satisfy the much smaller Canadian demand at a lower price (think drug companies). I'm not knocking Canada, I just don't think it is useful to use it as a model for what might work best in the U.S.

Posted by: Will Allen on November 22, 2002 04:23 PM

Will, you could be right that the downward pressure on prices from a single-payer for a group as large as the entire population of the USA would exert an influence so great as to damage innovation. (I think that's what you meant -- please correct me if I have misunderstood you. I hope you didn't mean that there should be no attempts made to control costs.)

So you'll have to design your own system. That's a discussion well worth having, and I hope you do, if you can somehow collectively refrain from jabbing horrified fingers at a false construct -- yes, it darn well was a construct the last time! -- that has been labelled "Canada".

If I might make a modest suggestion, though: the thing that makes our Medicare politically feasible (feasible, hell, it's bedrock) is universality. Never mind what I've been saying about the advantage of a larger group for cost-effectiveness. It's true, but it's not why the program has such emotional appeal. At a gut level, there's something very powerful about knowing that nobody will be left out. What that translates to is: "No matter how my circumstances may change, I -- and the people I love -- won't be left out."

If you hang on to that one feature, you'll be free to tinker a lot with the structure to suit your country's different needs, and it can still be made to work. Omit universality, though, and you create a group of people who will quite reasonably oppose it because there's nothing in it for them.

Posted by: Canadian Reader on November 22, 2002 06:07 PM

1. Jesse is of course right. A mild brain fart must have transmogrified adverse selection into moral hazard. Incorrectly.

2. OH, Canada! The problem with single payor, government monopoly health care is always the wait, wait, wait. 'Tis true that Canada spends only about 9% of its GDP on healthcare as against America’s 14%. But there are caveats to that.

For example, America’s 14% figure includes the cost of medical research. The budget of the National Institutes of Health alone - $27 billion in fiscal 2003 – is larger than the total healthcare expenditures of the provinces of Ontario and Quebec combined. Canada does little medical research.

No question, single-payer has many virtues. It is hassle-free. There are few forms to fill out, no waiting for checks in the mail. If you are sick, you go to the doctor or hospital, flash your card, and get your medicine.

Or rather – you wait for your medicine. Every year Canada’s leading free-market think-tank, the Fraser Institute, compiles waiting times across Canada in a report called “Waiting Your Turn.” Highlights from this year’s edition include:

Median waiting time for radiation treatment for breast cancer in province of Ontario: 8 weeks
Median waiting time for angioplasty in the province of British Columbia: 12 weeks
Median waiting time for radiation treatment for prostate cancer in province of Quebec: 12 weeks
Median waiting time for cataract removal in the province of Saskatchewan: 52 weeks.

. . . “Single payer” is an inaptly named system. In Canada, everybody pays for healthcare – the patient pays in pain, the employer pays in lost worker hours – but only the government’s costs are counted . . . a decade ago, the Canadian-American science writer Malcolm Gladwell noted that there were then more CAT scanners in the greater Washington DC metropolitan area than in all of Canada, and since then the technology gap has only grown.

NOTE: Nearly all of the above comes from David Frum (a Canadian) at NRO. The URL for the Fraser Institute is:

http://www.fraserinstitute.ca/shared/readmore.asp?sNav=pb&id=413

3. Regarding sourcing for legal costs and expenditures for premature infants and end of life, I used to be a professional health care analyst and that's what the HCFA wizards told us, back when there was a HCFA. I did a quick google search and found that 27 percent of Medicare costs occur in the last year of life - see "Medicare beneficiaries' costs of care in the last year of life," by Christopher Hogan, June Lunney, Jon Gabel, and Dr. Lynn, in the July 2001 Health Affairs. Preemies data is a little harder to come by, but I did find data that 40% of total infant healthcare is spent on premature infants.

Ok. Everybody can rant at me now.


Posted by: Anarchus on November 22, 2002 06:21 PM

Ooh! David "Axis of Evil" Frum and the Fraser Institute. I'm, like, crushed by the weight of authority there. Why not cite Ann Coulter and the Heritage Foundation too?

The Fraser Foundation is not exactly an unbiased source. They regularly produce "studies" slanted to support a right-wing political agenda. (Yes, we do have a small right wing in Canada, and they would like to demolish our Medicare system. What, you thought we all marched in lock-step?)

For a source that highlights the unreliability of such waiting time measurements, check out this paper:

http://www.hc-sc.gc.ca/english/media/releases/waiting_list.html

Quote:
"There may be serious problems of excessive waiting times for some procedures in some jurisdictions, at some times; or there may not. We simply have no reliable systems in place with which to assess what are, at the moment, still largely self-reported claims. [...] With few exceptions, our current understanding of the 'wait list situation' in Canada is so totally dependent on data of suspect quality, drawn from a variety of ad hoc sources, based on inconsistent definitions, used for a variety of purposes, and overseen by no one, that it is little wonder that we find so much confusion."

Out of data like that, you can cherry-pick just about any conclusion you want to flourish in the air. And this U of T paper makes a good point:

http://www.utoronto.ca/hpme/dhr/pdf/healthrelease_j2.pdf

Quote:
"A two-tier system, where those who can afford it buy care sooner, does not result in shorter public waiting lists. This has not happened in Britain, where despite the fact that 13% of the population chooses private care, waiting times in the public system have not dropped. In the United States, where it's a user-pay system, millions of citizens are denied the opportunity to even be on a waiting list because they and their doctors know they could never afford the service."

There's plenty of room for improvement. But the answer to that, you know, is to buckle down and improve the system, not to throw the whole thing out. Personally, if I had the choice, I'd much rather be able to go on a waiting list, even if it was longer than I'd like it to be, than know I could never be treated.

Posted by: Canadian Reader on November 22, 2002 07:28 PM

"At a gut level, there's something very powerful about knowing that nobody will be left out. What that translates to is: "No matter how my circumstances may change, I -- and the people I love -- won't be left out.""

You must leave out those who do not do their fair share. Too many human beings are likely to abuse the welfare benefits. This is an unavoidable fact of life. Human nature is negatively impacted by the at least metaphorical reality of original sin.

Last but not least, Canada is spending so much money on national health because it parasites off the United States. It is not a real country, but a land mass that takes advantage of its American neighbor's military might. When will Canada stop mooching?

Posted by: David Thomson on November 22, 2002 08:01 PM

"Canada does little medical research."

Yep, the Canadian parasites know that the Americans are suckers. Don't these people make you want to vomit? Do they even possess an ounce of shame?

Posted by: David Thomson on November 22, 2002 08:14 PM

(sweetly) I do hope that Mr. David Thomson enjoys a long, long, long life. Long enough, indeed, to become someone who is unable to do his "fair share".

Being charitable as well as shameless -- and not from a real country -- I also hope that by the time he realizes he was wrong, his compatriots will have ignored his views and devised a system that does not leave him out.

Posted by: Canadian Reader on November 22, 2002 09:21 PM

Re insurance principles ...

The odds against you individually ever having a condition that would benefit from a million dollar procedure are a few hundred to one.

The odds against you having a spare million dollars on hand when that happens are also a few hundred to one.

In a pure personal responsibility system, then, your B.O.T.E. odds against ever benefitting from a million dollar procedure are in the range of 100,000 - 1,000,000 to one.

Except that if these procedures were practised only on those who can afford them, they would never be developed at all (or at minimum they'd not be practiced enough to get good at it ... odds are you'd be guinea pig #1 or #2).

On the other hand, in a single-pool insurance system, your actuarially apportioned cost of having any million-dollar procedure you may ever need adds up to (ballpark) $2/month, and experienced professionals are standing by to take your call.

Figures of merit for US-style multiple-pool insurance systems fall somewhere in between these extremes (though your particular carrier is highly motivated to find reasons to deny coverage for your particular condition and/or procedure, and to out-guess the a priori odds that you will need any such procedure ... so they can avoid covering sick people to the extent possible).

Posted by: RonK, Seattle on November 22, 2002 10:38 PM

Worth noting -- US and Canadian real per capita government expenditures on health care are approximately equal ... though US expenditures cover a minor fraction of US citizens, and weakly subsidize others ... and Canadians obtain superior mortality/morbidity outcomes.

I have theoretical market-oriented reservations about single-payer systems ... but you have to have ideological blinders on to defend our current system against any other global benchmark.

Posted by: RonK, Seattle on November 22, 2002 10:49 PM

"I have theoretical market-oriented reservations about single-payer systems ... but you have to have ideological blinders on to defend our current system against any other global benchmark."

The United States does most of the medical research. Who in your socialist paradises is going to pick up the slack? Are you possibly waiting for the Canadians?

Posted by: David Thomson on November 23, 2002 06:03 AM

Ludwig Von Mises and Friedrich Hayek long ago concluded that the socialist economies must parasite off the capitalists. If nothing else, socialism is utterly unable to price goods and services without referring to a capitalist economy. Furthermore, the creative destruction underpinnings of a viable social order encourage the inventive sprit. Who competes with the United States in this regard?

Last but not least, America pays most of the defense bills for Canada and the rest of the world. These parasites pretend that the war on terror is imaginary and George W. Bush is some sort of war mongering cowboy. Why do they think this way? The logical conclusion is that they don’t wish to be inconvenienced by reality. It might bother their conscience.

Posted by: David Thomson on November 23, 2002 06:35 AM

Mr. Thomson's anger aside, it really isn't objectionable to me that Canada pursues it's self interest, and given their proximity to the U.S., it may well be that their regime produces the best results FOR THEM. At the same time, it really wouldn't be in the interests of the United States to inhibit innovation just to spite Canada. A single payer system in this country would greatly inhibit innovation, given the inevitable political pressure to control prices. Sorry folks, if you want rapid innovation in medical technology, you're gonna have to allow some people to become filthy rich in the process (as awful as that may sound), whcih means that you can't have a single payer which attempts to restrict supply or control prices.

Posted by: Will Allen on November 23, 2002 08:28 AM

Newbie question: Say, why would Canada's health-care payment system affect the amount of medical research done in Canada?

Isn't a Canadian company just as able to do research, patent a drug, and sell it for profit in the U.S. as an American company? If not, how is that because the Canadians have single-payer health insurance?

This is a separate issue than whether medical research costs throw off comparisons between US and Canadian health-care expenditures. But, if Canadians junked single-payer tomorrow, wouldn't they still be benefitting from US research? Forgive my ignorance.

Posted by: Matt Weiner on November 23, 2002 08:44 AM

Really, Mr. Bahner? How odd that no US court, before or after FDR, has EVER concluded that the Constitution outlaws income redistribution -- and they hardly could, since unless you tax everyone in the country an equal amount you are still taxing the rich a disproportionate amount to provide everyone in the country with an equal share of national defense, or roads, or whatever -- and thus redistributing benefits (unfairly, in your view) from the rich to the less rich. Moreover, John Adams, after the ratification of the Constitution, was an enthusiastic supporter of public schools funded disproportionately by the rich -- whether they sent their own kids to those schools or not. Nor did any of the Founders object to police forces funded in large part by taxes from people rich enough to afford their own private security guards, or tax-funded hospitals and asylums for the disabled. So much for your "general welfare" argument.

As for all those awful parasites out there supposedly living off the sweat of the productive: do I actually need to point out that rich people in this country still make much more money for the same amount of effort than the rest of us, thanks to their cleverness or their other forms of luck? Which, of course, is why people still want to get rich.

And, by the way, I was educated at the U. of California at Santa Cruz (B.A. with Honors in political science).

Posted by: Bruce Moomaw on November 23, 2002 09:43 AM

Mr. Moomaw, if you are truly unable to discern the difference between having the rich pay a greater share for roads and public schools, which the rich are able to access as easily as the poor, and simply taking money from the rich and giving it to other citizens for their solely private use, perhaps a return Santa Cruz is in order.

Posted by: Will Allen on November 23, 2002 10:03 AM

Matt, you've got it backwards. It is not that Canada's single payer system affects innovation in the U.S.; since the U.S. dwarfs Canada, Canada's policies have nearly zero effect on innovation in the U.S.. The point is, if the U.S. were to adopt Canada's system, with the inevitable political pressure to control prices and supply, would not innovation in the U.S. be greatly inhibited, with negative effects for not only U.S. citizens, but also Canada's (along with the rest of the world's)?

Posted by: Will Allen on November 23, 2002 10:12 AM


Canada and much of the rest of the world are economic "free-riders" off the U.S. investment in Research and Development and in Defense spending.

In health care and defense, economies of scale are critically important - because the products are so technologically and knowledge intensive the unit costs fall dramatically as volume increases. For drugs, it costs somewhere between $100 million and $200 million to bring a new drug to market from inception AND you only get about 17 years of patent protection on the product. Sooooo, there are no small companies ($50 million to $1.0 billion in sales) that can afford to take the risk of de novo new drug development. The same problem applies to small countries such as Canada as well.

Posted by: Anarchus on November 23, 2002 11:02 AM

People are pointing out that a single-payer health plan in the U.S. would damage both the U.S. and the rest of the world more than it's worth by inhibiting technological progress, but doesn't this say soemthing about the current global approach to intellectual property and innovation more than American/rest of the world's health care system per se? Companies know that they can sell at monopoly prices in the U.S. without facing a monopsony government buyer. Sure, that motivates the companies to get the research done, but is that the only way? It seems that we're taking two market failures -- monopoly from patents and externalities from medical research -- merging them into one, and hope that they balance each other out enough to get the "right" amount of research done at the cost of consumers. Is that the most efficient we can do? Even if the rest of the world didn't exist, and the U.S. were the only country in the world, I don't see why such a system is efficient or just.

Julian Elson

Posted by: Julian Elson on November 23, 2002 11:18 AM

"Sure, that motivates the companies to get the research done, but is that the only way?"

The answer is an adamant yes. Those who tend toward such research desire ample compensation. This is especially true in such a business environoment where the risks are so considerable.

"I don't see why such a system is...just."

It is supposedly unjust to desire payment for services rendered and risks taken? It seems that someone has perhaps been reading too much of John Rawl's banal works. May I suggest that it might be better to instead read Adam Smith's "Wealth of Nations?"

Posted by: David Thomson on November 23, 2002 11:53 AM

Julian, a perusal of the past hundred years or so of economic history gives ample evidence that without the real chance of getting filthy rich, people, on average, will not risk much or exert much energy in order to produce innovations. We can rail against the "injustice" of this to our heart's content, and certainly intellectual property is different from other types of property in important respects (thus the initial 17 year limit on patents), but without the prospect of a pot-o-gold, there isn't going to be much produced in the way of technological breakthroughs. As much as some would like, ya' just can't legislate away human nature.

Posted by: Will Allen on November 23, 2002 12:16 PM

Without the 17 year expiration on patents the system wouldn't be very just, but companies DO have pressure to keep innovating as patents roll off.

If you just left R&D to the government you'd get a lot more basic science research and much less focus on development of products. The recent Human Genome research is a case in point. Though controversial, the for-profit Celera Corporation came up with a highly efficient methodology that sped up the decoding process by 3-4 years.

There's absolutely NO "market" failure in healthcare because there's no free market. Doing away with the billions and billions of dollars of annual tax subsidies would make a HUGE difference in the amount of health care consumed in the United States and probably wouldn't do much to negatively impact quality of care, either.

That's all.

Posted by: Anarchus on November 23, 2002 02:28 PM

Will--
I think I may have posted before your immediately preceding comment came up on my browser. Indeed, what you said anticipated all my best points. Sorry for the mixup.

I'm still not sure that US single-payer would destroy innovation by sapping the profit motive, though. After all, under single-payer, a drug company would still stand to make a pot o' money if it develops a drug that the single-payer system will pay for.

An immodest proposal: Since drugs have to be tested before they reach market anyway, perhaps a single-payer system could set up clear criteria (cost-effectiveness and the like) under which new drugs would be funded, and at what price level. Then the drug companies would be able to calculate whether it was worth it to develop new treatments, based on how much the system would buy. Let's say, a newly accepted treatment would be guaranteed reimbursement for 17 years.

Of course the drug companies would run the risk of pouring money into a drug that didn't pass muster, but they run that risk anyway--this has something to do with how Sam Waksal got drafted into the National Rock-Hockey League, if I remember correctly.

As Anarchus points out, we don't have a market in health care.* In particular, a drug company's profits currently depend on whether insurance companies decide to reimburse for the drug, or doctors decide to prescribe it, not on a customer's decision to pay the price they charge. It's not clear to me that competition among insurance companies creates any kind of efficient market for drug research that a single-payer entity can't replicate.
*OK, he probably didn't mean what I'm saying.

(In fact, a lot of a drug company's revenues currently ride on whether the government, in the guise of Medicare, decides to pay for the treatment; research continues apace.)

Well, that's just a tentative thought. Please don't take it as a definitive statement on research and single-payer (in other words, Fisk gently). My appointment as Gore's HHS secretary hasn't cleared the Senate yet....

Posted by: Matt Weiner on November 23, 2002 03:33 PM

'In reality, it had been working quite well. However, the noise backwash over the border had the unfortunate side effect of convincing not a few Canadians that our health care costs were insupportably high. (sigh...) It did a lot of damage, that did. I'm not looking forward to a repeat performance.'

You mean Reagan didn't go to Vancouver and demand Trudeau "tear down this hospital?"

'For example, America’s 14% figure includes the cost of medical research. The budget of the National Institutes of Health alone - $27 billion in fiscal 2003 – is larger than the total healthcare expenditures of the provinces of Ontario and Quebec combined. Canada does little medical research.'

I have no idea where Frum gets this crap. The combined PPP-adjusted GDP of Ontario and Quebec is 486 billion, so if healthcare spending is proportional to population (the 9.7% percent level mentioned earlier), then they're spending $45 billion on healthcare which is like, uh, more than $27 billion. Leaving out that Ontario and Quebec have a total population of 9 million, while the NIH is funded by taxes from 350 million US citizens, is a pretty kooky trick, too. Christ.

'Sorry folks, if you want rapid innovation in medical technology, you're gonna have to allow some people to become filthy rich in the process (as awful as that may sound), whcih means that you can't have a single payer which attempts to restrict supply or control prices.'

This is a hilariously barbaric argument. Here's a more illuminating rephrasing:

"If you want rapid innovation in medical technology, you're going to have to allow some people to die today from not having enough money to pay for mainstream procedures."

This, of course, is so medical technology can result in everyone living longer in the future. Except the poor, who have to die for the good of innovation, for all eternity. At least until Christ returns and blows a gasket, I guess.....

Posted by: Jason McCullough on November 23, 2002 04:30 PM

Mr. Allen, if you are unable to perceive that we are allowed to force the rich to pay for private schools in this country even if they do NOT utilize them (to which, as I say, John Adams had no objection) -- and that we are allowed to force the rich to pay more than other Americans for roads, police forces and the military, even if they do not utilize them any more than other Americans do -- perhaps a return to grade school is in order. I had no idea that an initially intelligent thread about the precise nature of desirable government health-care plans would start attracting the most simpleminded of extreme libertarians.

Posted by: Bruce Moomaw on November 23, 2002 04:31 PM

Erratum, goddamnit: by "private schools" in the above item I meant "public schools".

Posted by: Bruce Moomaw on November 23, 2002 04:33 PM

The New Republic (Nov. 15) on David Frum's piece:

"THE HEALTH OF NATIONS: After Al Gore came out in favor of a single-payer health care system, it was perhaps inevitable that former Bush speechwriter David Frum would denounce his position. Frum is not only a conservative but Canadian. And to that particular species there is no phrase more likely to produce a hostile reaction than 'single-payer.'

"Frum does not disappoint. His entire argument is that the Canadian system is inferior to ours because Canadians are forced to wait for health care. And he provides statistic after statistic to prove it. But with all due respect to Frum's authority on the matter, there are two massive flaws in his analysis. First, Canada only devotes about 9 percent of its GDP to health care, while the United States spends 14 percent (and rising fast). If the United States imposed a single-payer system that cost 14 percent of its GDP, it would no doubt be vastly superior to Canada's. Second, Frum writes as though American health care were universally available. In fact, more than 40 million Americans lack health insurance.

"It would seem that a fair comparison of two health care systems would at least take account of the fact that one leaves tens of millions uninsured. Yet Frum fails even to mention the fact that Canada has universal insurance and the United States doesn't.

"A single-payer system may not be the best way to implement universal coverage. But any analysis of the problem that ignores the demerits of a widespread lack of insurance completely misses the point."

See also Jonathan Cohn's followup piece ( http://www.thenewrepublic.com/doc.mhtml?i=express&s=cohn112202).


Posted by: Bruce Moomaw on November 23, 2002 05:23 PM

"But the likelihood that we will become old does not vary substantially across the population. There are certainly types of insurance that insure across time rather than across people at a point in time. It wouldn't be unreasonable to think that there would be a market for insurance that charged a constant premium over the life cycle, if people could be assured that the company offering the insurance wouldn't drop the policy when they turned 65. Yes, it means the young subsidizing the old, but since we all hope to be old, that isn't so bad. It may well be that government provision is the only way to make the contract enforceable over a sufficiently long time period, however."

Actually, it would probably be better if we simply let people pay the market price for insuring their own risks at every point in time. People would pay less when they are young and just starting out, and pay more as they get older - over an average lifetime, it evens out at worst. In fact this has the advantage that the less fortunate people that don't live to see old age don't spend their entire lives subsidizing the more fortunate without ever getting anything to show for it.

"If you are doctrinally opposed to group insurance, you will no doubt be shocked to learn that even individual insurance involves being placed into a premium band by the insurance company. You can't have insurance at all without some risk pooling. This applies to all forms of insurance: life, health, disability, home, auto, you name it."

I am well aware of that. I was pointing out that, if you attempt to ensure the entire population without placing them into several premium bands, bad things will happen.

"Here's the thing, though... risk pooling is to your long term advantage. If you are now young and healthy it may not look that way to you, but unfortunately, the only way yet discovered not to grow old is to die young."

So how am I better off overpaying now and underpaying later than I would be if I paid market price for insurance at all times. If I don't overpay now, the extra money I didn't spend doesn't just evaporate, after all.

"Plan to grow old; if you do, you'll be grateful for your earlier prudence."

But if the government manages to get me to overpay now and then makes other people overpay later so that I can underpay later, then my prudence doesn't really come into play. It's only when I get to pay the market price at all times that my prudence works to my advantage.

"Insurance companies set their rates using actuarial tables, plus of course a margin for adminstration and profit. Group insurance is cheaper per person than the exact same people insured individually, because there's less administration."

This is true. There's a trade off between having too many groups (and driving up your admin costs) and having too few groups (and losing money on the high-risk end of each group while driving away potential customers on the low-risk end of each group). Private companies operating in a competitive free market will tend toward the optimum point on that tradeoff. Other organizations that are shielded from competition will be less likely to find the optimum.

Posted by: on November 23, 2002 06:31 PM

"Figures of merit for US-style multiple-pool insurance systems fall somewhere in between these extremes (though your particular carrier is highly motivated to find reasons to deny coverage for your particular condition and/or procedure, and to out-guess the a priori odds that you will need any such procedure ... so they can avoid covering sick people to the extent possible)."

That motivation would be nicely counterbalanced by the motivation to avoid pissing off customers and losing business - if it wasn't such a pain in the ass to switch carriers (the whole concept of getting insurance through your employer is completely ludicrous, and the tax incentive for this arrangement should be removed forthwith).

"This is a hilariously barbaric argument. Here's a more illuminating rephrasing:

"If you want rapid innovation in medical technology, you're going to have to allow some people to die today from not having enough money to pay for mainstream procedures."

This, of course, is so medical technology can result in everyone living longer in the future. Except the poor, who have to die for the good of innovation, for all eternity. At least until Christ returns and blows a gasket, I guess....."

This is the way that every area of technology progresses. First somebody comes up with a neat gadget, but it's expensive to produce. He makes a bundle selling it to rich people. Rich people buy it and try it out while the masses look on in envy. Then after people have had some time to think about it, someone else comes up with a way to produce it more cheaply, and makes his own bundle selling it to the masses, who have been lusting after it since it first came out. A few more iterations of that later, the former "luxury item" can end up as a "basic necessity".

That's how ordinary folks ended up with cars, refrigerators, air conditioners, computers, and so on.

But if a "benevolent" government comes along while the gadget is still expensive and simply buys them (at the high price) and distributes them to the masses, then the second smart guy has no reason to come up with a cheaper version. Since the masses won't be buying it themselves, they have no reason to care what it costs.

So if we want our children to enjoy not just this generation of goods and services, but the next generation and the one after that, our best bet is to let the market do its thing and let people get paid for figuring out how to get today's luxury items to the masses at a profit.

Posted by: Kenneth Uildriks on November 23, 2002 06:49 PM

"There's a trade off between having too many groups (and driving up your admin costs) and having too few groups (and losing money on the high-risk end of each group while driving away potential customers on the low-risk end of each group). "

I should have added "and finding customers that would otherwise have been on the low-risk end of each group instead placing themselves on the high-risk end of each group through more reckless behavior". I should also have put my name on the post above.

Posted by: Kenneth Uildriks on November 23, 2002 06:52 PM

Easy ones first. By itself, single payor wouldn't necessarily do ANYTHING to the health care system. In fact, the government might consider forcing standardization of payments on the industry - it could be done similarly to the way the SEC regulates the financial industry - with standardization of the payments process a lot of money could be saved. The practical problem with single payor is that the single payor ends up being the government, and over time in an attempt to control costs the government starts reducing reimbursement, trying to set price controls for drugs and doctors' salaries, etc.

This statement is wrong: "(In fact, a lot of a drug company's revenues currently ride on whether the government, in the guise of Medicare, decides to pay for the treatment; research continues apace.)" The government only reimburses for drugs used in the hospital; outpatient prescriptions are not paid for by medicare or medicaid. That's a big fight in Congress that's been going on for some time, and in the next 12 months we're very likely to see passage of a bill that extends Medicare payments to outpatient drugs. But for the moment, drug companies don't scramble under any context to produce drugs that the government will pay for because . . . . . the government already has a VERY RIGID efficacy-oriented drug approval process set up at the FDA - in place since the Kefauver Amendment in 1962. Odd as it sounds, before Kefauver, drug companies only had to proove safety. Kefauver required scientific proof of safety AND EFFICACY, and an important part of the efficacy judgement is an FDA Advisory Committee hearing of outside expert doctors who make recommendations in favor of approval and against approval of new drugs.

This statement is false: "Second, Frum writes as though American health care were universally available. In fact, more than 40 million Americans lack health insurance." While it is true that perhaps 40 million Americans don't have health insurance, that's very different than saying health care isn't universally available. It is universally available, but if you don't have insurance you have to pay for it out of your own pocket. Also, if you really, really need hospital care and you can't pay for it, you get a pass. The hospital industry loses billions of dollars every year on free care.

That's all for now.


Posted by: on November 23, 2002 07:02 PM

"No matter how my circumstances may change, I -- and the people I love -- won't be left out."

This statement must be qualified if it is to make any sense. It is far too nebulous to be of current value. Every insurance and welfare program cannot ignore this most important question: what are the limits to medical care? Does the program have to cater to some guy's desire to grow another five inches taller and become better looking than Robert Redford? Are we talking about only life and death emergencies? If so, is one man's emergency another man's ho-hum difficulty? The United States already virtually guarantees everybody emergency care. Therefore, what in hell are we talking about?

Posted by: David Thomson on November 23, 2002 09:15 PM

Another means of silently lessening the inequality of property is to exempt all from taxation below a certain point, and to tax the higher portions or property in geometrical progression as they rise.

Posted by: Thomas Jefferson on November 24, 2002 01:03 AM

Personal property is the effect of Society; and it is as impossible for an individual to acquire personal property without the aid of society, as it is for him to make land originally. Separate an individual from society, and give him an island or a continent to possess, and he cannot acquire personal property. He cannot be rich. So inseparably are the means connected with the end, in all cases, that where the former do not exist, the latter cannot be obtained. All accumulation therefore of personal property, beyond what a man's own hands produce, is derived to him by living in society; and he owes, on every principle of justice, of gratitude, and of civilization, a part of that accumulation back again to society from whence the whole came. This is putting the matter on a general principle, and perhaps it is best to do so; for if we examine the case minutely, it will be found, that the accumulation of personal property is, in many instances, the effect of paying too little for the labour that produced it; the consequence of which is, that the working hand perishes in old age, and the employer abounds in affluence. It is perhaps impossible to proportion exactly the price of labour to the profits it produces; and it will also be said, as an apology for injustice, that were a workman to receive an increase of wages daily, he would not save it against old age nor be much the better for it in the interim. Make then Society the treasurer to guard it for him in a common fund, for it is no reason that because he might not make a good use of it for himself that another shall take it.

Posted by: Thomas Paine on November 24, 2002 01:06 AM

Anonymous--
"(In fact, a lot of a drug company's revenues currently ride on whether the government, in the guise of Medicare, decides to pay for the treatment; research continues apace.)" The government only reimburses for drugs used in the hospital; outpatient prescriptions are not paid for by medicare or medicaid."

Thanks for the correction. Still, can the point be transferred from other medical technology? Medicare has to pay for other procedures, and I think that hasn't stifled innovation.

"While it is true that perhaps 40 million Americans don't have health insurance, that's very different than saying health care isn't universally available. It is universally available, but if you don't have insurance you have to pay for it out of your own pocket."
And if you don't have insurance, you probably can't afford to pay for it out of your own pocket. So it's not available to you. Emergency care is a poor stopgap (and probably isn't what Frum is talking about when he describes the waiting list). So the New Republic's point stands.

Posted by: Matt Weiner on November 24, 2002 05:25 AM

"The practical problem with single payor is that the single payor ends up being the government, and over time in an attempt to control costs the government starts reducing reimbursement, trying to set price controls for drugs and doctors' salaries, etc."

Don't private insurance companies already do this?

Posted by: Matt Weiner on November 24, 2002 05:27 AM

"Don't private insurance companies already do this?"

A private insurance company possesses limited funds. It must impose limits in order to survive. The government can always print more money and is susceptible to political pressure. To be blunt: the government has a much harder time saying no. Almost certainly, the situation eventually deteriorates to the point where individuals will place demands upon the system bordering on the ridiculous. Must I remind you that human beings are not innately good? There is no such thing as a sound social policy that fails to heed the harsh fact that the at least metaphorical reality of Original Sin is alive and well on planet Earth. A
dash of Calvnism will do us all a little good.

Posted by: David Thomson on November 24, 2002 07:10 AM

David, that completely subverts the argument that single-payer will stifle medical innovation that Will has been making. (It also goes against what Anonymous says; if you're right, then private insurance companies interfere more with the administration of medicine than the government will.)

If individuals will be able to demand more from a government system than from a private system, then there will be more money to be made in medical research, which should become an even bigger profit center.

In any case, the human nature argument would predict that Canada's health expenditures would spiral out of control, which doesn't seem to be the case.

Posted by: Matt Weiner on November 24, 2002 07:37 AM

“If individuals will be able to demand more from a government system than from a private system, then there will be more money to be made in medical research, which should become an even bigger profit center.”

Theoretically your theory sounds plausible, but you overlook one important factor. The system quickly becomes financially troubled, and limits have to placed somewhere. Inevitably, the politicians find it easier to go after the drug companies and the doctors. This results in less money for research and development.

Please do not forget that Canada’s system parasites off the United States. The problem is that you fail to realize that my assessment is very rational and easily proven. It may initially seem extreme until you think about it for awhile. Ludwig Von Mises and Friedrich Hayek were right on target when asserting that a socialist economy cannot survive without the pricing information that only a capitalist system can provide.

Posted by: David Thomson on November 24, 2002 08:46 AM

"if you're right, then private insurance companies interfere more with the administration of medicine than the government will."


Private insurance companies will inherently “interfere more with the administration of medicine than the government will.” That’s actually a good thing! Somebody has got to pay the bills and a private insurance company possesses only so much money in its bank account. The government, though, can always print more money.

Posted by: David Thomson on November 24, 2002 08:58 AM

Medicare hasn't stifled medical innovation, though it has maybe slowed it down some. Medicare generally pays less than the true economic cost of many/most procedures. So what happens is that for procedures that are both private and medicare (angioplasties, knee/hip replacements, etc), the prices charged for private pay insurance patients are much, much higher for precisely the same procedure. The total reimbursement for combined Medicare & private pay insurance is probably somewhat less than it would be if Medicare payed full freight (note: if Medicare payed in full, then private pay pricing would definitely not be as high as it is today).

In the area of drugs, thus far Medicare has had little impact, though that will change when Medicare coverage is extended to outpatient drugs.

Regarding single payor (and the government) and private pay insurance, managed care and the like: For mere mortals such as corporations, insurance companies, doctors and hospitals, influence and power is always limited. These entities try hard to reduce utilization, eliminate unnecessary procedures, cut reimbursement and the like, but their ability to do so is limited by a myriad of factors. In the case of the government, they can do almost anything by fiat (the way HCFA sets Medicare and Medicaid reimbursement is one example). With single payor, ALL the power is controlled by the government which has the ability to be really stupid and the industry participants have limited ability to respond. Single payor is not totally unlike communism - much better in theory than in practice.

I actually think this is still off the mark: "And if you don't have insurance, you probably can't afford to pay for it out of your own pocket. So it's not available to you. Emergency care is a poor stopgap (and probably isn't what Frum is talking about when he describes the waiting list). So the New Republic's point stands."

The first and simplest point to make is that health care insurance and access to health care are completely different issues. You do NOT have to have insurance to have access to health care.

Recognize that the 40 million people without health care insurance are the so-called working poor and their dependents. These people have jobs, live in apartments with TV and cable and have normal lower-class consumption habits. They can certainly afford paying out of pocket for occasional trips to the doctor for minor ailments. In urgent cases, they still get necessary healthcare for free via emergency room treatment. Which is not to ignore their problems with non-urgent expensive care such as arthroscopic operations for torn knee cartilage. But the fact is, they do have extensive access to health care at the low end (trips to the GP's office) and at the high end (life saving urgent procedures). What they are missing is the stuff in between. I don't see how the New Republic's point stands as written.

Beyond ending the truly bizarre tax subsidy of health care, one other very smart thing that could be done is to make health care insurance into true insurance rather than an all-encompassing system for reimbursement. In auto insurance, for example, gasoline, regular maintenance and even major mechanical failure (outside of warranty) are NOT COVERED. And they shouldn't be covered. In health care, then, the corollary would be covering major expenses per event or perhaps covering annual health care expenses over a set limit ($1,000 perhaps?). This system would be much more rational, reduce excessive utilization and be extremely inexpensive relative to current health care insurance . . . . . . . .


Posted by: Anonymous on November 24, 2002 09:37 AM

Not sure if the abrupt shift in argument and subject matter indicates any concession on earlier main points, but I see the real mother lode of private payment rationalization is the research problem, so ... dig we must.

Yes, obviously, research cannot thrive in a single-payer environment. That's why the Pentagon has no stealth technology, no smart bombs, and for that matter, why the planet has no GPS, no internet, no television. Someone must pay the R&D piper ... but why me?

Solution: The US should conquer and impose US-style private payment systems on selected foreign populations (Iraq? Venezuela? Sweden? Canada? doesn't really matter). US can then adopt a public payment system, parasitizing useful developments streaming from the research colonies territories protectorates.

GDP savings alone are sufficient to triple US military expenditures. Sure, we'll hear some whining about "genocide" (excess mortality imposed on our research plantations partners), but what are ya gonna do ... some folks don't get economics.

Posted by: RonK, Seattle on November 24, 2002 10:36 AM

"In the case of the government, they can do almost anything by fiat"

This is another way of saying that the government can print more money. Needless to add, private corporation executives would be sent to jail for doing likewise. Limits must be imposed. The only question is where should we draw the line. Also, I am utterly convinced that the patient should pay for part of their medical care. This will keep costs down. Those who advocate nationalized healthcare possess a very childishly naive view of human nature. They simply can't comprehend that ultimately too many people will take advantage of the majority. The late Mancur Olsen devoted a lot of study to the question of deciding when the breaking point is reached. Is it at 5%, 10%, or 20%? How many parasites can we endure before the system collapses?

Posted by: David Thomson on November 24, 2002 10:42 AM

To David Thomson: If government-financed health care is a bad thing because the government "won't be able to say 'no' to the pressure to constantly expand it", then why the hell will the government be able to resist the pressure to impose it in the first place? If it can do one, it can do the other. And if the people are so stupid that they insist on cutting into drug research money even when it clearly harms them (which they certainly haven't done up to now), we might as well give up on democracy in general.

And exactly how is waving the Free Market around as the solution to absolutely all human problems an argument against any income redistribution at all - including the transfer of SOME money from the well-off to the poor to pay part of their medical bills, with the proportion paid depending on what the income of the person receiving the aid happens to be? As I say, if you reject the idea of income redistribution at all, you have to assume that the richest and poorest American should pay exactly the same total amount in taxes for the government services (roads, cops, the military) which they use in equal measure. Any takers?

I see from Mr. Thomson's last message, though, that he seems to be edging toward a compromise: "The patient should pay for part of their medical care." Yes indeedy, with the part depending on his income. Of course unlimited payment of everybody's medical bills by the government will quickly inflate medical costs for unnecessary procedures right through the roof. But how many people on this thread are proposing that? The real debate is where to "draw the line", as he says. Which is where the real debate is on any redistributionist issue.

Posted by: Bruce Moomaw on November 24, 2002 11:28 AM

Bruce Moomaw writes, "As I say, if you reject the idea of income redistribution at all, you have to assume that the richest and poorest American should pay exactly the same total amount in taxes for the government services (roads, cops, the military) which they use in equal measure. Any takers?"

I have a better suggestion...why don't you take a course in logic? There is, in terms of logic, a big difference between graduated income taxes and "redistribution" of income. (In quotes, because income isn't "distributed" in the first place.)

Suppose a rich person pays $100 towards the purchase of a tank, while a poor person only pays $10 towards the purchase of that tank. That's a situation of graduated income taxes.

Now suppose that the rich person pays $100, of which $10 is handed to the poor person by the government (for no service rendered to the government, by that poor person). Can't you see how that second situation is different from the first?

In the second situation, the poor person is directly receiving money from the government, for no service rendered (in clear violation of the Constitution, which requires that all Congressional taxation be for the "general welfare" or "common defence" of the United States). In the first situation, the poor person is merely paying less in taxes...which is not in violation of the Constitution. In the first situation, the poor person is not receiving money from anyone.

Posted by: Mark Bahner on November 24, 2002 12:34 PM

“To David Thomson: If government-financed health care is a bad thing because the government "won't be able to say 'no' to the pressure to constantly expand it", then why the hell will the government be able to resist the pressure to impose it in the first place?”

The majority of voters sense that too many of their fellow citizens will abuse the system. Please note that I didn’t say everybody would take advantage and destroy it for everybody. That is why I refereed to the works of Mancur Olsen. Didn’t the voters in the very liberal state of Oregon just reject a so-called progressive medical welfare program?

“If it can do one, it can do the other. And if the people are so stupid that they insist on cutting into drug research money even when it clearly harms them (which they certainly haven't done up to now), we might as well give up on democracy in general.”

We should not give up on democracy, but merely recognize its limitations. We should heed Frederick Bastiat’s warning that the system is threatened when even a few folks use the law to extort money from their citizens.

“And exactly how is waving the Free Market around as the solution to absolutely all human problems an argument against any income redistribution at all - including the transfer of SOME money from the well-off to the poor to pay part of their medical bills, with the proportion paid depending on what the income of the person receiving the aid happens to be? As I say, if you reject the idea of income redistribution at all, you have to assume that the richest and poorest American should pay exactly the same total amount in taxes for the government services (roads, cops, the military) which they use in equal measure. Any takers?”

Yep, you finally got my point. I advocate a flat tax and everybody should pay the same percentage. We would have a much wealthier nation if this was the case. There is a possible argument for a government backed insurance program, but that’s not the same thing as welfare. Governments inherently waste money. Thus, they should always be the last resort.

I see from Mr. Thomson's last message, though, that he seems to be edging toward a compromise: "The patient should pay for part of their medical care."

A compromise? Insurance companies have always imposed limits on benefits. It’s either that, or they will go bankrupt. There’s nothing new here whatsoever. So called "co-pay" policies are just the ho-hum standard in the insurance business.

Posted by: David Thomson on November 24, 2002 12:36 PM

It was rather predictable, and silly, that the DOD would be given as an example of a single payer system that allows for innovation. Well. Those that advocate single-payer tend to be hyper-critical of the current regime's inefficiency, and now they turn to the Defense Dept. as an example of cost efficient mangement? That really is amusing, if unintentionally so. The DOD is an incredibly inefficient, wasteful organization that does produce innovation despite the scads of money sent up through the chimney. Unfortunately, wasting money on defense is the only way to prevent the more wasteful event, war. If such a model were to be replicated for providing health care, with it's gigantic individual consumer/voter demand (check with your neighbors, Ron , not too many of them wish to personally use an M-1 Abrams tank), the current 14% GDP used to provide care would be soon dwarfed. In reality, what would happen is what has happened in Canada; the single payer would seek to restrict supply and control prices, and becasue it is THE single payer, backed by state power,it would succeed, with the resultant inhibitive effect on innovation. Jason, I am sorry that you view the history of technological development as barbaric, but it is what it is, and your moralizing doesn't change anything. Technology WILL NOT evolve rapidly without the prospect of large profits, and it is somewhat pathetic that the past century's evidence showing this can be completely ignored. Finally, Mr. Moomaw, I understand thay you firmly believe in the majority's inherent right to do whatever they wish to the minority, but your inability to discern between having the rich pay for a greater share of those public goods that the rich can choose to use if they wish, and forcing citizen A to give citizen B property, for B to use however he wishes, really makes you the simplistic one.

Posted by: Will Allen on November 24, 2002 12:43 PM

Will Allison writes, "Now, a reasonable case may be made that wealth transfers are defensible in some instances,..."

Not in the United States. At least not by the *federal* government. The U.S. Constitution does not authorize the federal government (Congress) to take money from one group, to give to another (for no service rendered to the United States).

The Constitution requires EVERY PENNY of federal spending to be on matters that are "necessary and proper" for the "general welfare" of the "United States." (Article I, Section 8.) No taking of money from one group, to give to another, could ever meet those *deliberate* restrictions on federal government power.

"...given that a society in which a substantial percentage of citizens were unable to provide sufficient food or shelter for themselves, absent such transfers, is one in which anarchy or tyranny may threaten."

The U.S. Constitution DOES authorize Congress to spend money putting down "insurrections" and "rebellions." It does NOT authorize Congress to pay "protection" money to those threatening insurrections or rebellions.

Until or unless the Constitution is amended to allow transfers of money from one group to another (for no service rendered to the United States), ALL such payments are unconstitutional, and therefore illegitimate.

Posted by: Mark Bahner on November 24, 2002 12:49 PM

Military waste is an excellent example of why we must restrict the role of government. A nation must not allow the private sector to fight its wars and convict its criminals. This is the role of government. That’s why we are forced to put up with waste in the military. Why expand the areas where waste will also be the norm?

Posted by: David Thomson on November 24, 2002 01:29 PM

"Issues Guy" writes, "It's a wonder that people would post comments here containing "facts" that come straight from Rush Limbaugh."

1) Why do you put "facts" in quotes, "Issues Guy"? Do you dispute any of the numbers I cited? If you don't dispute the numbers, why don't you admit that putting the word "facts" in quotes was an attempt to make my numbers seem untrue, when you knew they WERE true? (Talk about a pathetic, deceitful "debating" ploy!)

2) It's NOT a wonder that people here post ideas that could come straight from Karl Marx. (I half expect someone to write, "After all, shouldn't we take from each according to his ability, and give to each according to his needs?") The fundamental precept of the Democratic Party, since the time of FDR, has been to take money from (generally) rich people, and give it to others, in order to buy votes. As a wise men once noted, "If you take from Peter to pay Paul, you can always count on Paul's vote."

Issues Guy continues, "Notice the careful insertion of the word "taxable" before the word "income" and the word "income" before the word "taxes" - and this in a discussion of Social Security without mentionin the Social Security tax!"

I had ALREADY mentioned Social Security taxes, in case you hadn't bothered to (or couldn't) read my post.

"Notice the careful absence of any discussion of what percentage of income that top 5% receive - and in case it is brought up there's still the hedge "taxable" income."

I didn't mention the percentage of income that the top 5% "receive" (sic...they EARN it, unless they are Democrats, voting to take it from others)...because what the top 5% EARN is irrelevent, except to Marxists. And I'd foolishly assumed that there were no Marxists involved in the discussion. But since Issues(sic) Guy asked for it:

In 1999, the top 5% of after-tax income earners earned 34% of the total taxable income in the U.S., and paid 55.5% of the total income taxes.

http://www.techcentralstation.com/1051/techwrapper.jsp?PID=1051-250&CID=1051-102902A

Apparently, some of those who are less well off would like to vote themselves even more of other peoples' money.

Posted by: Mark Bahner on November 24, 2002 01:31 PM

Two comments demand comment:

THIS comment:

"If government-financed health care is a bad thing because the government "won't be able to say 'no' to the pressure to constantly expand it", then why the hell will the government be able to resist the pressure to impose it in the first place? If it can do one, it can do the other."

Is beyond ridiculous. Most really large, dumb government programs we have today were resisted at first but then eventually implemented in some small way. And then they grew out of control and not only couldn't be killed but could hardly even be slowed down. The unhappy truth is that once implemented, government programs are incredibly resistant to elimination no matter how much value the program destroys.

And this remark:

"Yes, obviously, research cannot thrive in a single-payer environment. That's why the Pentagon has no stealth technology, no smart bombs, and for that matter, why the planet has no . . . ."

is laughable. When liberals begin holding up the Pentagon as an example of intelligent and efficient government spending, it's time to nationalize EVERYTHING in the name of efficiency.

Most recently, the Crusader mobile artillery weapons system - which cost a fortune, wouldn't fit in air transport aircraft and was too heavy and immobile to function anywhere but on a superhighway - just barely, just barely was not put into production. It would have been a helluva artillery system for defending, say, Kansas, but it was a "mobile" artillery system that couldn't be taken ANYWHERE.

Posted by: Anarchus on November 24, 2002 01:32 PM

Mark, you take the same tack as Jason, only from the opposite side. Railing against what is unconstitutional may be emotionally satisfying, but has little impact on reality. I think it is unfortunate that state power has expanded to the point that a majority can do whatever it wishes to the minority's property, for whatever purpose it deems fit, but the reality is that it has, and the majority is largely satisfied with this state of affairs. This leaves two options; persuade the majority to inhibit it's exercise of power, or take up arms against the majority. Unless you actually believe that the majority's exercise of power has become so tyrannical as to justify a violent response (I certainly don't), the second option is the only legitimate one. Appeals to Consitutionalism will not suffice in persuading a polity that sees such arguments as technical and legalistic, and in any case, such arguments are always subject to reversal whenever a majority of 5 on the highest court says otherwise, or a sufficiently large majority amends the Consitution itself. You see, the obnoxious Farm Bill that was recently passed is morally illegitimate regardless of what the Constitution says, and it would be so even if the Constitution were explicitly amended to permit such a law. One must persuade by making the case why it is morally wrong to take by force that which cannot be obtained by voluntary agreement. I happen to believe that a morally legitimate case can be made to transfer property when it is shown that failure to transfer would give rise to anarchy or tyranny. Very little of the transfers that take place in this country meet this test, since it is an extraordinarily small minority that is actually unable to provide themselves with sufficient food and shelter. Health care is a terrific conumdrum because the best health care is so dependent on cutting edge technology, and no society on earth, no matter how wealthy, free, or statist, will ever be able to provide the best technology to all that would benefit from having it. That is not how technology develops, as has been pointed out several times in this thread. We have become so wealthy that food has become so cheap, relatively speaking, that the poor, for the first time in human history, have morbid obesity as a significant health hazard. Unless Ron K.'s prediction turns out to be accurate (I sincerely hope it does), a similar phenomena will not happen in health care. Some people are going to get better access to health care technology than others, unless it is decided that absolute equality in access to technology is paramount, in which case innovation will be stifled, and our great-great grandchildren will enjoy no better health care technology than our children do.

Posted by: Will Allen on November 24, 2002 02:16 PM

'So if we want our children to enjoy not just this generation of goods and services, but the next generation and the one after that, our best bet is to let the market do its thing and let people get paid for figuring out how to get today's luxury items to the masses at a profit.'

The Cambridge dictionary definition of luxury:

'luxury
noun
great comfort, esp. as provided by expensive and beautiful things, or something which is pleasant to have but is not necessary'

I fail to see how chemotherapy meets the definition. Experimental programs, sure, but life-saving common treatments?

Looking at the eligiblity rules for Medicaid, near as I can tell, if you're a male without kids who gets cancer before 65, and you're in the uninsured working class, you're simply going to die. That rectifying this will destroy the entire system of medical research is a spectacularly silly argument.

Well, not as much as the declaration that *all* of the existing single payer systems (Europe, Canada, Japan) are useless because there's a non-single payer system in existence that they gain benefits from (the U.S.). Talk about your convenient argument.....

Posted by: Jason McCullough on November 24, 2002 02:50 PM

>It's NOT a wonder that people here post ideas that could come straight from Karl Marx. (I half expect someone to write, "After all, shouldn't we take from each according to his ability, and give to each according to his needs?")

Much of the initial ten-point programme in Marx's Communist Manifesto (1848) has been implemented or attempted already in many west European countries as readers may judge:

1. Abolition of property in land and application of all rents of land to public purposes.
2. A heavy progressive or graduated income tax.
3. Abolition of all rights of inheritance.
4. Confiscation of the property of all emigrants and rebels.
5. Centralization of credit in the banks of the state, by means of a national bank with state capital and an exclusive monopoly.
6. Centralization of the means of communication and transport in he hands of the state.
7. Extension of factories and instruments of production owned by the state; the bringing into cultivation of waste lands, and the improvement of the soil generally in accordance with a common plan.
8. Equal obligation of all to work. Establishment of industrial armies, especially for agriculture.
9. Combination of agriculture with manufacturing industries; gradual abolition of all the distinction between town and country by a more equable distribution of the populace over the country.
10. Free education for all children in public schools. Abolition of children's factory labor in its present form. Combination of education with industrial production, etc.
Reference: http://www.anu.edu.au/polsci/marx/classics/manifesto.html

Of course, that programme does not result in: "From each according to his ability; to each according to his needs."

However, administratively that add-on is quite straight forward to apply. As already suggested in several places at various times, all that is necessary is for government to impose a tax at the rate of 100% on all incomes and then redistribute the proceeds according to official assessments of family or personal needs, after deducting collection expenses, naturally. A revolution is unnecessary, as Marx apparently came to appreciate, according to Engels' preface in the 4th English edition of Capital where he says Marx came to believe Communism could be achieved by Parliamentary means.

It seems the only impediment is that citizens of mature capitalist economies are unduly resistant to income tax at the rate of 100%. As far as I know, even governments of self-proclaimed socialist countries have been inhibited about imposing 100% rates of income tax, which only goes to show Marx never quite got the hang of things.

Posted by: Bob Briant on November 24, 2002 02:56 PM

Well, what is far more spectacularly silly, Jason, is to take Medicaid's current rationing regulations as being relevent to whether the prospect of large profits are needed for rapid technological innovation. If you wish to state that the large profits to be earned in the United States for medical innovation are irrelevent to such innovation, please do so explicitly. If you wish to state that a single payer system in the United States will not affect such profits, please do so explicitly. If you wish to take the Department of Defense's management methods as a model for distributing health care , while maintaining innovation (as Ron K. somewhat humourously appears to advocate) , please do that explicitly. This thread is getting funnier by the moment.

Posted by: Will Allen on November 24, 2002 03:30 PM

"Looking at the eligiblity rules for Medicaid, near as I can tell, if you're a male without kids who gets cancer before 65, and you're in the uninsured working class, you're simply going to die."

Ah, but then some here would say: If he be like to die, he had better do it, and decrease the surplus population.

Posted by: Canadian Reader on November 24, 2002 03:38 PM

"We have become so wealthy that food has become so cheap, relatively speaking, that the poor, for the first time in human history, have morbid obesity as a significant health hazard."

This might be one of the main reasons for our health care crisis. Why should the individual taxpayer be responsible for the self inflicted troubles of other folks? Don't we reserve the right to demand that people take care of their own physical well-being before they attempt to empty our wallets?

Posted by: David Thomson on November 24, 2002 03:39 PM

Interesting. Now it seems the supposed research problem (single payer underspending must necessarily inhibit new invention) -- so central to the argument only a few posts ago -- has been conceded, or at least abandoned, in favor of the supposed efficiency problem (single payer overspending must necessarily waste resources).

But that's a very odd place to take one's stand, since the current US system is the planet's most diseconomic. The real per capita cost of the current US system's tax-financed components (covering a minority of US population) already exceeds the total real per capita cost of competing systems (with universal coverage of their respective populations).

How is it that Hayek's self-appointed intellectual heirs are so reluctant to benefit from competitive feedback?

P.S. Nobody took up the other challenge: why must it necessarily fall to the US to overpay for services and thus carry the burden of research incentives? Is this question entirely irrelevant, even with the latest shift of position?

Posted by: RonK, Seattle on November 24, 2002 03:41 PM

"Looking at the eligiblity rules for Medicaid, near as I can tell, if you're a male without kids who gets cancer before 65, and you're in the uninsured working class, you're simply going to die."

Why are we ignoring the incredible expenditures spent on keeping someone alive for an additional few weeks? Even the conservative religious traditions do not oppose passive measures in letting these people die earlier. We might have more money to spend on 65 year old cancer patients if it wasn't wasted on hopeless causes.

Posted by: David Thomson on November 24, 2002 03:54 PM

Future Medicare projections ARE inaccurate. Technological change in health care in the next 20 years will radically reduce costs. Think about the microchip and it's impact on informational economics, now turn to biochips and their impact on human biology and disease reduction. The real issue will come down to freedom to choose. People must be allowed, with a doctor's consent, to choose when they would like to leave this life. The last year is where most of the costs reside, and in many cases the aging would rather go.

Posted by: Zack Lynch on November 24, 2002 04:18 PM

Ron, I haven't shifted anything. As stated before, a single payer system will either be enormously wasteful in it's attempts to maintain innovation, as the DOD is, or it will attempt to restrict supply and control prices, thus inhibiting profits and therefore innovation. Given the first route, with a good as widely utilized as health care, would likely bankrupt any nation that attempted it, the second route is the one that is pursued in single-payer nations. Do you suppose those nutty Canadians restrict supply and control prices because they've had too many Molsons? Or are you positing, like Jason seems to, that large profits are irrelevent to innovation? Now, if we could magically prevent the rest of the world from benefitting from the innovation that takes placedue to the large profits to be earned in the U.S., only then could it be said that competitive feedback existed. Finally, if you wish to attempt to convince other nations to drop their regimes, which offer no incentives to innovate, go ahead. Your chance of success is pratically nil, for the very practical reason of the U.S. market being profitable enough to produce innovation that others will benefit from. We are then left with the choice we face now;destroy innovation in order to prevent others from gaining access to it at a lower cost, or allow ourselves to benefit from innovation, even if others are not providing the incentives we are willing to. This isn't to say that the current regime could not be changed in ways that would allow innovation, without turning health care into one large DOD-style boondoggle, but a single payer system ain't it, no matter how much the Canadians like it.

Posted by: Will Allen on November 24, 2002 04:19 PM

"Interesting. Now it seems the supposed research problem (single payer underspending must necessarily inhibit new invention) -- so central to the argument only a few posts ago -- has been conceded"

Not so fast. Please reread my previous comments:

"Theoretically your theory sounds plausible, but you overlook one important factor. The system quickly becomes financially troubled, and limits have to placed somewhere. Inevitably, the politicians find it easier to go after the drug companies and the doctors. This results in less money for research and development."

Posted by: David Thomson on November 24, 2002 04:42 PM

David Thomson: your postings about "Canadian parasites" and other mean-spirited comments about those with "self-inflicted" health problems inspires me to increase my charitable giving this Christmas. I don't want to debate health care policy or research expenditure; I just want to make a contribution to the general welfare of those less fortunate through no fault of their own. Ignoring the politics and religion of these organizations, I'm giving to:
City Team Ministries; Salvation Army; Second Harvest Food Bank; One Warm Coat (coats and toys)
Who are YOU giving to?

Posted by: r on November 24, 2002 08:33 PM

"David Thomson: your postings about "Canadian parasites" and other mean-spirited comments about those with "self-inflicted" health problems inspires me to increase my charitable giving this Christmas."

I'm so sorry that you dislike the truth about the Canadians. Why are you unable to show me where I'm wrong? Of course we already know the answer to that question? You can't because the facts are completely on my side of the argument. Hey, why did you overlook my harsh criticism of the Europeans?

Why are upset with my pointing out that many poor people suffer from self inflicted medical troubles? This makes no sense whatsoever. I am, glad that you plan to increase you charitable contributions. However, I find it weird that you are doing so because of my alleged mean spiritness.

"I don't want to debate health care policy or research expenditure.."

People like you prefer not to do the challenging intellectual work required to improve society. You instead prefer the mushy sentimental stuff. Oh well, at least you are not out mugging old ladies and torturing puppies.

Posted by: David Thomson on November 24, 2002 10:10 PM

I don't know how may times I'm going to have to hit Mark Bahner and Will Allen over the head with that 2-by-4. If you think that the Constitution rules out income transfer payments of any sort, then you must conclude that it requires that the richest and the poorest American must pay exactly the same total amount in taxes, since they utilize all those agencies for "the general welfare" (the military, cops, roads) to the same degree, and therefore taxing the rich more than the poor for them means that we end up taxing the rich more for them than the share of them utilized by the rich. I rather doubt -- even without that quote from Thomas Jefferson listed above -- that this is what the Founders had in mind, since (unlike a small sprinkling of libertarian fanatics in this country) they weren't morons.

Now let us assume a program that gives every American the same amount of a certain social benefit, but taxes them in different amounts to fund it -- and, in the case of the more affluent, taxes them more than they receive from the benefit. This is certainly constitutional; the benefit itself goes to everyone and so (like roads, cops and the military) is connected to "the general welfare" of the people; but different people are taxed different amounts to pay for it. And the arithmetical result, of course, is exactly the same as taxing only some people to pay benefits only to others. Which may explain why every court in the land, Mr. Bowden, has concluded that you're full of it.

The reason why you and those like you are full of it morally is more obvious: even with progressive taxation, the rich make the same amount of money with less work effort (sometimes MUCH less work effort) than the rest of us. And -- if someone is less prosperous than someone else through no fault of his own -- there is, of course, NO moral argument against his equalizing the situation through forcible property taking, contrary to the bizarre moral fantasies of Will Allen and similar Ayn Randians, in which all sins are sins of action and there are no sins of inaction and neglect.

As for David Thomson's argument in favor of a flat-rate income tax: if that would make us more prosperous, why stop arbitrarily there? Why not make income tax rates regressive (as George Gilder actually proposed once), and make us REALLY prosperous? (He's completely wrong, by the way, in thinking that a flat-percentage income tax such as he favors is the same thing as taxing everyone the same total amount in taxes, since the latter would be the ultimate in regressive-rate income tax.) Of course, any belief that we need a non-progressive income tax to make us prosperous ignores the embarrassing fact that supply-siders predicted, virtually to a man, that Clinton's 1994 tax hike on the wealthy would actually cause the economy to shrink. (Paul Crig Roberts did a cover story for National Review, "How to Grow the Deficit". Forbes Magazine predicted that the American economy would collapse, and urged investors to move their money to the safe harbor of -- you guessed it -- Japan.)

And as for David Thomson's and Anarchus' arguments that we can keep a government medical program from coming into existence at all, but once it's created we won't be able to keep it from growing: how odd that that hasn't led to the progressive income tax becoming steadily more and more progressive forever. Indeed, the movement over the past half-century has been in the other direction. And it should be kept in mind that the poor drug companies, who will supposedly be starved of research money by any such program, are among the biggest campaign contributors in this country. I really don't think you need to worry about the government starving them for research money. Nor do I see why simply transferring some income from the rich to the poor to allow them to buy more medical services will cut into the total profits of drug companies and thus curtail their research.

Posted by: Bruce Moomaw on November 24, 2002 10:25 PM

Hmmm... I think that my post which mentioned "justice" as a factor in health care payments (briefly) reminded people of that old argument I had, and reacted against that.

Anyway, I was mostly thinking about efficiency, not justice, when I wrote that post, though justice certainly is, or should be a factor.

By the way, David Thomson, have you read The Wealth of Nations or Theory of Justice? Ideally, if you are to opine on their relative quality, you've read both of them, though I'm wondering if you've read either of them.

Anyway... the main argument I've gotten as for why the U.S. should spend 14% of its GDP on health care and get about comparable results to Canada, which spends 9% (slightly worse in terms of infant mortality, life expectancy, etc. but basically comparable) is that the U.S. is supplying the whole world with R&D so that it, and the rest of the world, can have advanced medical technologies. Let's assume that the ONLY reason anyone would do medical research is for the U.S. market, which is the only place they turn a profit. Thus, the U.S.'s high health care expenditures pay for all medical research, everywhere in the world.

spending on medical research is roughly $30 billion. The statement was vaguely worded, so I couldn't tell whether it was U.S. only or global. Let's assume, though, that it's U.S. only, so that total R&D is greater, which would strengthen the arguement for the current system.

The roughly $30 billion is 44% of total medical research, which would put global R&D on health services at $68 billion.

$68 billion, for your information, is about 0.68% of the U.S. GDP.

Now, given that our health care system is about as effective as Canada's, and the costs of medical research are 0.68% of the U.S.'s GDP, and we pay 5% more of our GDP for health services, we're getting about 14% of that extra cash going to health care to go into research. That isn't to say that all of the money's wasted, of course: it stays in the circular flow and all, and is profitable for health care companies.

Still, if our objective is to get a lot of research done, we're doing it very inefficiently. If we had a Canadian style health care system, devoting 9% of GDP to health coverage (and remember, given that U.S. has a GDP per capita 31% higher than Canada's, so it would have more per capita resources devoted to care even if it were equal as a proportion of GDP (to get our health care resources per capita down to Canadian levels, we'd have to reduce health care expenditures by HALF, to about 7% of GDP). Then, assuming that public sector efficiency in the allocation of R&D is one FOURTH as efficient as private sector allocation (an assumption of quite prodigious government waste), we could spend 2.7% of our GDP on medical research. The result? we come out 14 - (9 + 2.7) = 2.3% of our GDP ahead.

Of course, that's oversimplifying: unfortunately, in this scenario, some private research companies lose profits that come from selling drugs at monopoly prices. That's unfortunate, but I haven't seen anyone making an argument for our system based on medical product monopoly's rights to make large profits: I've it argued based on the pragmatic imperative that research be done. If that's the reason for our current system, we're very inefficient at doing it.

Julian Elson

Posted by:
Julian Elson on November 24, 2002 10:43 PM

Postscript: a scan of Bahner's and Thomson's comments in other nearby threads suggests that they tend to think in black/white terms -- any degree of income redistribution whatsoever equals full-blown SOCIALISM and "central planning". It's interesting that Bahner quotes Lester Thurow in supposed support of his ultra-libertarian position, without mentioning the minor fact that Thurow himself remains an enthusiastic supporter of a very large degree of income redistribution. You might ask why, Mark.

(You might also note that that "wise man" who said that "a government that robs Peter to pay Paul can always rely on the enthusiastic support of Paul" was one George Bernard Shaw -- a vastly bigger enthusiast for robbing Peter to pay Paul than I will ever be.)

Posted by: Bruce Moomaw on November 24, 2002 10:46 PM

"...the U.S. should spend 14% of its GDP on health care and get about comparable results to Canada, which spends 9%..."

I would also like to know when Canada and the Europeans will pull their own weight regarding the war on terrorism. When will these parasitical nations increase their military spending?

Posted by: David Thomson on November 24, 2002 10:53 PM

"Thus, the U.S.'s high health care expenditures pay for all medical research, everywhere in the world."

Yup, we are the suckers of the world. The rest of the nations mostly mooch off the United States. Can anyone point out a serious medical development resulting from the efforts of the Canadians and the Europeans?

Posted by: David Thomson on November 24, 2002 11:03 PM

"Postscript: a scan of Bahner's and Thomson's comments in other nearby threads suggests that they tend to think in black/white terms -- any degree of income redistribution whatsoever equals full-blown SOCIALISM and "central planning"."

I believe that any degree of income distribution is a grossly stupid act. We should instead focus upon making the economic pie bigger for everyone. The goverment simply wastes money. It is ridiculous to grant the public sector more power over us unless there is no other choice. Have we not enough inner city ghettos? It is the fault of the Democrats for inadvertently keeping people poor. It is truly a scandal that some families pass along their welfare benefits from one generation to the next. We have only the Democrats to blame for this sad predicament. Bill Clinton fortunately did some good with his welfare reform policies, but the Democrat "elites" prefer welfare dependency to increase their chances of winning elections.

Posted by: David Thomson on November 24, 2002 11:19 PM

Consider me a generally well-educated generalist who reads a fair amount of history, political science, economics, psychology, cultural studies, etc. I am not an accountant nor an economist and sometimes the deep, technical descriptions and analyses leave me in the dust. I have also lived outside the U.S. and I think this gives me a perspective that is helpful, both as an American and an outside observer, if I can say it that way.

This $20 trillion figure is astounding but I find it credible. It, once again, indicates the profound changes that have been taking place in U.S. society and government during my lifetime--I´m in my 50´s. Private corporations and government officials have been marching forward ever more quickly to the beat of a drum that is not in rhythm with the interests of "common people" or of most of the world.

I come from a working class family but through education and hard work made it into the "professional class". There,too, I always felt I had something of a dual perspective and I never ceased to be amazed at how the broad interests of "all the people" could be ignored by those who made decisions at the top of society's leadership class.

The Homeland Security Act, massive tax cuts that benefit the wealthy class, the almost unimaginably extensive actions of the defense establishment, high technology weaponry, and legislative actions that undermine the general good of the unemployed, the young, the old, and the infirm--those who often serve as a barometer of whether a government and society is truly benefiting its citizens--have transformed the U.S. that I learned about in my formal education--elementary, secondary, university, and post-graduate. In larger terms, U.S. economic and military power are having an impact on the world that is dangerous and harmful, sacrificing the general good of the world order in the name of security and the "interests" of the U.S.

Whatever happened to the idea that we each have a better place in which to live when the neighborhood or world around us is generally in the best condition possible, including sharing one's own wealth with those who have less? Also, all my life I have been raised in the church and have held to deeply spiritual and "Christian" values that included brotherly love of all people and a certain and real acceptance of the diversity of people. I see this, too, being lost as fundamentalism and extremism take deep root in American society and exhibit less and less tolerance for others who are perceived as different.

While what I am writing is not expressed in specific economic terminology or paradigm, at its core economics is about understanding human behavior and thinking and then trying to allocate limited resources, hopefully in the fairest and most progressive way. More and more it seems that economics is becoming a by-word for seeing how you can get as much as possible for yourself and to hell with anyone who is not perceived as your associate or ally.

I remain hopeful in the ability of humanity to resolve these difficult, painful issues, that's part of my human nature that has been formed over a lifetime, but sometimes I think this perception is painfully naive and, in itself, harmful, too. I have a feeling there are a lot of people who share this perspective and are fighting daily within themselves to figure out a way to make things better. I can simply add this, outside the U.S., increasingly, the idea of the U.S. as a "land of opportunity" is being destroyed by the strong conviction that it is simply the "land of opportunism" and this cynical and pessimistic view is often accompanied by a disappointment that means that people want to think otherwise but can't in face of all that is happening in the U.S. and by the U.S. to the rest of the world.

In my youth I always felt that the best resource that the U.S. possessed was a way of life and behavior that was so just, so progressive, so essentially generous that by its very nature it had a persuasive power in the world that was more effective than any other influence and would generate positive alliances, international cooperation, and progress for people everywhere, and that in this context Americans could enjoy their place and there opportunities and feel and have a peace that would be real and worthy. Yes, there are those real-politicians who will say I am hopelessly idealistic and don't understand the dangers, hatred, and envy that exist in the world and which would attack our enviable position out of some deep, dark human psychosis. To them I would say that they are living in a world of elitism that has so completely isolated them from the vast majority of humanity and their condition that they no longer have the ability to perceive the nature of their fellow man. Yes, there are those driven by dark, psychotic ideas and thoughts in the world. But, these dangerous people constitute a minority and many of them serve in leadership positions in every country, including the U.S.

Posted by: Mike on November 25, 2002 06:02 AM

"The Cambridge dictionary definition of luxury:

'luxury
noun
great comfort, esp. as provided by expensive and beautiful things, or something which is pleasant to have but is not necessary'

I fail to see how chemotherapy meets the definition. Experimental programs, sure, but life-saving common treatments?"


It doesn't matter whether chemotherapy is "necessary" nor not. The fact is that it's expensive, and the best way to change that is to allow people to make large profits by coming up with a cheaper replacement for chemotherapy. Otherwise, you'll end up subsidizing chemotherapy treatments until the end of time, and miss out on a lot of stuff that's not only cheaper but better.

Medical innovation is especially important for us, because every single one of us is under a death sentence. Our only hope is for someone to invent a cure for old age in time to save us. That is more likely when the pace of medical innovation is fast, and less likely when it is slow. Anything that interferes with medical innovation is therefore a direct threat to our lives.

Posted by: Kenneth Uildriks on November 25, 2002 06:23 AM

First of all, Julian, the population of the U.S. and Canada do not have similar charateristics in terms of genetic make-up, lifestyle choices (Americans are more obese and sedentary, on average, for example), and many other factors that affect life expentancy, so it is very difficult to measure effectiveness of health care by such measures. As to the rest of your comments. I'm afraid I don't follow; are you saying that because the U.S. spends more on health care, and receives roughly comparable results, that profits are no longer needed to encourage innovation? Perhaps I'm not reading your post correctly, but are you also implying that money spent on research outside the U.S. cannot earn profits within the U.S.?

Mr. Moomaw, since you have decided to repeatedly engage in the ad hominen, there is no longer any requirement to maintain civility. Someone who believes the following:
"And -- if someone is less prosperous than someone else through no fault of his own -- there is, of course, NO moral argument against his equalizing the situation through forcible property taking..."
-is a common thug, in that they believe that the use of violence is legitimate whenever they believe there are unequal results that cannot be attributed to individual efforts. Lemme guess..... those with the club get to determine what is "fair", and then they will proceed to bludgeon those that they wish to take from. Might makes right. Thank you Mr. Moomaw; it is always preferable when a thug drops the pretense of civilization, and reveals his true nature.

Posted by: Will Allen on November 25, 2002 07:41 AM

Will,
As I understand Julian's argument, it works as follows:
The US spends 14% of GDP on healthcare. Canada spends 9% of GDP on healthcare. Assume that adopting a Canadian-style system would cut US healthcare costs to Canadian levels (maintaining comparable levels of care).
[You've disputed the comparability; noted. I would dispute the comparability in the other direction, given the 40 million uninsured. But if that's what we're going to dispute, let's dispute that, not the research argument.]

"Let's assume that the ONLY reason anyone would do medical research is for the U.S. market, which is the only place they turn a profit. Thus, the U.S.'s high health care expenditures pay for all medical research, everywhere in the world." So Julian is not saying that money spent on research outside the U.S. cannot earn profits within the U.S.; for the sake of argument, he is assuming that that's the only place it does earn profits. Of course, this is highly implausible, but we'll grant it to your side.

So, granting these two assumptions, the U.S. is subsidizing medical research by not going single payer. Julian's question is, how much are we paying, and how much are we getting? We're paying 5% of GDP [that's the difference between 14% and 9%], and we're getting $68 billion of medical research--that's the total of all worldwide R&D expenditure. Julian says that 0.68% of our GDP.

So, by not going single-payer, we're spending 5% of our GDP, and getting 0.68% of GDP out of it. As Julian points out, this is damned inefficient. Encouraging innovation through the profits to be gained in our system isn't working very well.

If this argument holds, then the need to subsidize medical research isn't a good reason to keep our current system. Single-payer opponents should either refute Julian's numbers, explain some other problem with the argument, or switch to the "Single-payer can't possibly work" argument.*
As RonK put it, the efficiency problem rather than the research problem.

This last probably amounts to saying that the US couldn't get the level of health care we now have for 9% of GDP. Anyway, if that's what we're going to argue, let's argue that, and leave the "We're subsidizing everyone else's research alone." If Julian's argument is right, we could subsidize it more efficiently in other ways.

(And David, this quote: "Thus, the U.S.'s high health care expenditures pay for all medical research, everywhere in the world." was an assumption for the sake of argument. It's probably not really true.)


*Or libertarian arguments of the form "It's illegitimate for government to get involved with this, because that's not one of government's functions." This seems to be preaching to the converted to me--libertarians shouldn't countenance government insurance under any conditions, so the efficiency and research problems are moot.

Posted by: Matt Weiner on November 25, 2002 09:36 AM

“Private corporations and government officials have been marching forward ever more quickly to the beat of a drum that is not in rhythm with the interests of "common people" or of most of the world.”

On the contrary, the world is increasingly becoming wealthier. This is especially true for the “common people.” An improved economy ultimately lifts all boats.

“I come from a working class family but through education and hard work made it into the "professional class". There,too, I always felt I had something of a dual perspective and I never ceased to be amazed at how the broad interests of "all the people" could be ignored by those who made decisions at the top of society's leadership class.”

Hmm, are you saying that America is now a dictatorship? It seems to be that we had a election and the Democrats came out the losers. Were "all the people” ignored?

“U.S. economic and military power are having an impact on the world that is dangerous and harmful, sacrificing the general good of the world order in the name of security and the "interests" of the U.S.”

The people of America can be proud that they are resolutely fighting against the worldwide threat of the Islamic terrorists. It's also time for the rest of the supposedly free world to cease parasiting off of us.

“... including sharing one's own wealth with those who have less? “

Who has criticized the voluntary sharing with those who have less? I see no such sentiment expressed by anyone on this thread.

“I see this, too, being lost as fundamentalism and extremism take deep root in American society and exhibit less and less tolerance for others who are perceived as different.”

Yup, we most certainly do have to be concerned about the Islamic fundamentalist who live among us. They do indeed “exhibit less and less tolerance for others who are perceived as different.”

“More and more it seems that economics is becoming a by-word for seeing how you can get as much as possible for yourself and to hell with anyone who is not perceived as your associate or ally.”

Gosh, what can I say? I must remind myself to be kind and not viciously sarcastic. The only thing that I might politely suggest is that the writer should expand his reading interests.

Posted by: David Thomson on November 25, 2002 10:06 AM

Ok, this is thread is out of hand. Thanks to everyone for arguing (especially Julian; those numbers are pretty damning).

Posted by: Jason McCullough on November 25, 2002 10:13 AM

“(And David, this quote: "Thus, the U.S.'s high health care expenditures pay for all medical research, everywhere in the world." was an assumption for the sake of argument. It's probably not really true.)”

Alas, but it’s a very fair assumption to make. What other nation even comes close to America regarding medical research?

This morning the Wall Street Journal published the following editorial which is very relevant to our discussion. It should make your blood boil. The parasites are doing their best to steal from us:

http://www.opinionjournal.com/editorial/feature.html?id=110002681

Posted by: David Thomson on November 25, 2002 10:19 AM

Wow, what a thread. I don't check the blog for a day or two and I miss out on a very interesting discussion.

My two or three cents...

I hate to agree with David T., but under a single payer gov't. health care system the political pressure to expand coverage and, hence, costs, would cause unending growth of healthcare expenditures as percentage of GDP.

The only solution to curbing the increasing costs is intelligent and well targeted rationing of services. No politician is willing to be the one to take the heat for denying constituents health care. The free market can do this better.

Health care costs will, however, continue to rise for the foreseeable future. While many new technologies are indeed cost savers - say surgical equipment and procedures that permit successful out patient surgies that a short while ago were done in patient - many are enhancements of existing technology with questionable marginal benefits.

The bottom line is that we are an aging population and medical knowledge can address more and more of our conditions. Thus, consumption increases on the intensive and extensive margins. Again, the marginal benefits of much of the consumption is questionable. That is why Canada gets roughly the same bang for its buck by spending 9% of GDP as we do spending 14-15% of GDP.

Just because a procedure provides *some* benefit doesn't mean that it should be done. It may not make economic sense.

Another reality that I saw glossed over in the posts was that in our insurance market, some very healthy people are subsidizing the care of some very sick people. It cannot be any other way, You cannot segregate the health care insurance market they way you can segregate, say, the automotive insurance market.

Health care insurance is fundementally different than other forms of insurance. It is not based on the wealth of the insured or the value of the item to be insured. There are no limits to potential benefits received.
People purchase health care insurance to insure against catastophic events, but also TO GAIN ACCESS TO SERVICES THEY WOULD OTHERWISE NOT BE ABLE TO AFFORD.

A single payer system does not change the above and I do not see how it could curb costs UNLESS POLITICIANS WOULD HAVE THE COURAGE TO SET UP A SERIOUS RATIONING PLAN.

A single payer system would also enroll all those not currently covered so there would actually be an immediate spike in expenses.

The best that can be said of the effects of a single payer system on pharmaceutical and other R&D is that nobody knows.....certainly the direction of R&D would change, but would the quantity and quality....? Right now products are introduced to the market because producers know the insurance co.s will finance their purchase. A single payer system would be able to exert total control over what would be financed and what would not. This would be a good thing if the criterion was based on economics; the the cost equal the benefits...is there real value being brought to the market....

A single payer system would probably encourage greater investment in preventative medicine. Under our current model this doesn't happen because consumers switch plans too often and one company's investment becomes an uncompensated positive externalty as the
consumer enrolls with a competitor.

The savings due to prevention if coupled with rationing would represent a significant savings, according to some researchers.

Americans are a wealthy bunch and we demand to be fixed when something breaks due to our tendency to over indulge in wealth related unhealthy life styles. Other countries to which we often compare our health system are less indulgent. Furthermore, they are less apt to demand to be treated for many conditions that may be considered the result of natural processes of
aging, etc. As one Canadian health care administrator put it to me, Canadians aren't as greedy as Americans.

Finally, we do have socialized medicine in this country. Medare (over 65), Midecaid (indigent), and the VA. For those who believe that the government cannot provide health care services efficiently, there are several studies that show remarkable efficiency in these programs; particularly the VA which gets excellent ratings across the board.

If advocates of a single payer system were honest they would admit that the primary arguement in their favor (as far as researched conclusions go) is that coverage would be extended to all Americans. Forget the idea of cost savings. This is unsubstantiated.

Apologies for the length of this post.

Posted by: E. Avedisian on November 25, 2002 10:42 AM

Apologies for bad spelling as well...Medicare, Medicaid, etc,etc...

P.S. the key to understanding health care costs lies in marginal benefits analysis. Consumers, physicians, and payers cannot seem to get together on this topic. The insurance companies are the only ones willing (out of necessity) to delve into it.

Posted by: E. Avedisian on November 25, 2002 10:57 AM

“Other countries to which we often compare our health system are less indulgent. Furthermore, they are less apt to demand to be treated for many conditions that may be considered the result of natural processes of aging, etc. As one Canadian health care administrator put it to me, Canadians aren't as greedy as Americans.”

This is why I’m astonished at those who worship the 9% of Canadian GDP figure vs. our 14-15%. We must know whether we are comparing apples to apples. Otherwise, the comparison is of little value.

Posted by: David Thomson on November 25, 2002 11:10 AM

To Mssrs. Allen and Thomson: Ah. So anyone who believes in economic redistribution at all is a "common thug" who believes that "might makes right"? Most interesting. Make sure you attach that tag to Professors DeLong and Thurow -- and to Milton Friedman, with his proposed "negative income tax". (Personally, I prefer Mickey Kaus' scheme, in which anyone able-bodied who can't find a private job would fall back on a system of last-ditch sub-minimum wage jobs, with the Earned Income Tax Credit raised enough that it is actually possible to survive on such jobs.) Make sure you also attach that tag to Woodrow Wilson, to Abraham Lincoln (who was fond of speeches denouncing the "mistreatment of labor by capital), to Jefferson and Tom Paine -- and to the rest of the Founders, who put not a word in the Constitution forbidding the government from taxing ONLY the rich to pay for the military, cops, roads, and public schools.

Jason McCullough is right; this thread has turned ridiculous, thanks to its hijacking by three nutcase extreme libertarians. Let me repeat the obvious: of course there comes a point at which economic redistribution reduces productivity enough that it does more net harm than good to a society. Just as obviously we are nowhere near that point yet -- a fact proven again, dramatically, in 1994. (One can make a good case that the Western Europeans aren't near it either; they may make less money per year, but they also have a lot more vacation time, which seems to suit them just fine.) And there is absolutely no reason to think that we, or any other country, will slide inevitably toward that point; America's movement over the past half-century has been in the direction of MORE income inequality, with the support of the American people. (Ditto for all other democracies, who keep making those repeated swerves between Left and Right.) There is no reason to assume that the same thing won't happen in regard to that share of income redistribution devoted to health care.

And the question of whether we should switch to a single-payer scheme is, of course, completely separate from the question of what medical conditions such a scheme should and should not cover. It's also separate from the question of whether we should, instead, simply give more money to low-income people to buy their own private medical insurance -- or some mixture of these schemes.

Posted by: Bruce Moomaw on November 25, 2002 01:01 PM

"....apples to oranges..."

Cultural differnces are only a part of the phenomenon.

The real difference is that the single payer socialized systems can ration health care such that the services provided are those that give the most bang for the buck.

So much of health care purchased in the US occurs beyond the point of diminishing marginal benefits. Much of it along the "flat line" section of the curve and a considerable amount on the negative section.

This is, from an economic perspective, pure waste; or worse.

The tremendous amount of money spent on end of life care in the US is but one example.

By way of anecdote, my daughter was claiming to experience headaches. I noticed that they seemed to occur after she reported having a bad day at school and never on weekends, holidays, over summer vacation or when she was having fun at school.

I believed the headaches were tension related. My wife insisted that a doctor get involved. We have insurance after all........

Well the Doc agreed that the sysmptoms were indeed most likely tension related. However, she felt a few tests were in order, "just in case". There were blood draws, CT scans, etc, etc,....and ultimately, nothing wrong could be detected.

My wife was pleased and the insurance co. picked up the tab. When I got the explanation of benefits I saw that the tests had cost a few thousand dollars.

I asked my wife if, had the payment come out of pocket, would she have gone ahead with the testing anyhow?

The answer was "no".

Now my wife is a fine lady with many wonderful attributes. Yet, would her Canadian equivalent have behaved the same? Would the insurance system have let her?

I think that the "greed" aspect I refered to would effect what Americans would demand from politicians regarding health care services under a socialized regime and I think that politicians would play to that aspect of our character.

Somehow the Canadians don't feel this same demand.

There may be a difference between the physician cultures as well. US docs are rather pampered. They demand the best and latest whiz bang gizmos to be in their hospitals. These things cost money and they must be paid for within their economic life span; which, at the pace of technological development, can be short.

As a result, there is much incentive for induced demand here that doesn't occur in other countries.

Physicians here are also much more prone to "the god complex" than those in socialized environments. Our docs simply won't be told how to practice. If a generic pharmaceutical can lower a patient's pain level from a 10 to a 5 for 50$, but there is a new patented product that can take the pain from a 10 to a 4 for 300$, then the new product will be prescribed; damn the cost because doc has a moral obligation to help his patient as he sees fit.

The patient is on doc's side because he trusts doc, 4 is better than 5, and the insurance will pick up the tab.

Now that I think of it, maybe there is some fundemental diference in the character of citizens that is making the comparison of health care systems akin to apples and oranges.

Posted by: E. Avedisian on November 25, 2002 01:04 PM

Correction: in my description of Mickey Kaus' scheme, I should have said "last-ditch system of sub-minimum wage PUBLIC jobs".

Posted by: Bruce Moomaw on November 25, 2002 01:09 PM

Bruce, the issue of whether or not we should switch to a single payer scheme is absolutely INseperable from a discussion of what sevices should be provided.

What will be covered and how that decision will be made is integral to the ultimate success or failure of the system.

And, we do give money to the poor to purchase their own healthcare. It's called Medicaid. In most states Medicaid is provided through a managed care model. People can choose from several plans. They then receive services at the same facilities than anyone else does. Medicare, a similar plan for the elderly (and some disabled), is also a managed care model these days.

Posted by: E. Avedisian on November 25, 2002 01:17 PM

Maybe I'm having a bad day Matt, but Julian's point still escapes me, in that he still hasn't established how, if the U.S. adopted single payer and eliminated the prospects for profit on innovation, the citizens of the U.S. would be better off. It is not sufficient to simply assume that the research could be subsidized at less expense and achieve comparable results, for the method of deciding in which direction capital will flow has as much to to do with positive results as how much capital is invested. This is why the investment community, when presented with two firms of comparable prospects, will look more favorably upon the one which has executives that have invested substantial personal assets in the firm. We once again return to the flaws of central planning; Julian seems to assume that political bodies can allocate capital as well as people who are risking their own capital, with an eye on satisfying people at great profit. The past century does not support such an assumption, and an examination of how difficult it is to cut off capital to dead-end projects at the Dept. of Defense provides further evidence of the problematic nature of capital funding decisions made solely by political bodies. Also, Julian seems to assume that the extra 5% GDP invested in the U.S. is completely due to the U.S.not being a single payer nation, and that all of that 5% is available to provide incentives for innovation. What is the basis for those assumptions?

Mr.Avedisian, I have large areas of agreement with you, but note that the following:
" A single payer system would be able to exert total control over what would be financed and what would not. This would be a good thing if the criterion was based on economics; the the cost equal the benefits...is there real value being brought to the market...."

ignores mountains of evidence that political bodies (which, after all, is what a single payer is) do not make such decisions based upon economics, even if it is assumed that the single payer can assimilate sufficient knowledge to do so, which really is impossible in a tremendously complex economy. Look no further than the Department of Defense as an example of a single payer system which tries to maintain innovation, and only does so in a horrifically inefficient manner. Once the Senator from the State of Thalidomide has an electoral interest in seeing the capital continue to flow into a research project, and can horse-trade his support with the Senator from the Great State of Archer Daniels Midland, well, that's where the money is going to flow, results be damned. For all the problems with the current regime, and I would support changing many aspects of it, it is easier to reduce capital flows into unproductive channels when at least some people are risking their own capital. Concentrating all capital allocation decisions into one political body is an exceedingly dangerous idea.

Posted by: Will Allen on November 25, 2002 01:22 PM

And Will, I agree with you.

That's why I used the qualifier "if".

As I said, I'm sure political pressures would bring an US single payer system to at least the same - and probably worse in the long run - situation we are in today.

Posted by: E. Avedisian on November 25, 2002 01:50 PM

Okay... I suppose my post earlier was confused an unclear. Some clarifications on the assumptions used for my post:

First of all, yes, the idea that the 5% of GDP that we spend over Canada's is based on incentives for innovation is an assumption. This was an assumption made frequently earlier in the thread by David Thomson et al when referring to the reason why the U.S. pays so much for health care. Canada spends half as much per capita on health care, and gets, in terms of some important measures like life expectancy, infant mortality, etc, superior results. The question is, why? The answer earlier in this thread was basically: "Canada and the rest of the world are freeloading off of American consumers. Drug companies innovate to make profits in the American market, and if we, too, like the rest of the world, closed that off to them, innovation would slow to a snail's pace."

Now, the explanations in this thread, with the last few posts by E. Avedisian and such, have shifted the focus from the costs of research and development to cultural and institutional factors.

Anyway, though, when I posted, I was still dealing with the research idea.

Second, I never assumed that political bodies can allocate research funding as efficiently as private capital markets. I assumed that they could allocate it at least 1/4 as efficiently. In fact, the costs would still be less if the U.S. government allocated research funds only 1/7th as efficiently. I happen to think that the government can probably do significantly better than 1/4th as efficiently as private capital markets (probably better than 1/2 as efficiently), especially if such a subsidy program is intelligently designed, gives private research companies and capital markets a role, and doesn't let politicians get too involved in the process of funding allocation.

Overall, I tried to make the assumptions as strong as possible in favor of the current system.

However, my post DOES ignore institutional and cultural factors. Since that's where this discussion seems to be headed, perhaps we should disregard that old post, since it isn't really relevant to that line of thought.

Julian Elson

Posted by: Julian Elson on November 25, 2002 02:20 PM

With so many participants, it is difficult to keep straight who has made which point. Why the U.S. spends 5% more on health care is a very complex question, without a single explanation, and it is impossible to determine how much of that 5% provides incentive for innovation, so it is impossible to determine how changing that number will affect innovation. My point was simply that a single payer system such as Canada's greatly reduces the profits available for innovation, and that innovation would thus suffer, to everyone's detriment, if the U.S. were to adopt a similar regime. If it is conceded that privately allocated capital is better at producing innovation, why is reducing the incentive for allocating such capital seen as positive? That is what I took from your original post, Julian; that since large profit opportunities result in unjust, unequal, distribution, it is better to eliminate such profit opportunities, despite the ability of such opportunites to provide the most rapid innovation.

Posted by: Will Allen on November 25, 2002 02:53 PM

"Second, I never assumed that political bodies can allocate research funding as efficiently as private capital markets. I assumed that they could allocate it at least 1/4 as efficiently."

I doubt whether the public sector can even be 1/10 as efficient. Private companies must make decisions premised upon limited funds. Their executives cannot print more money. Incentives are put in place to get results. Government employees are rewarded mostly for playing it safe. They are looking at their thirty year retirement package instead of the enormous rewards handed out by the major pharmaceutical companies. Also, it's considerably harder to fire a civil service employee for incompetence.

I concede that government workers can achieve stupendous results in short term situations. The Enigma code breakers and the Manhattan Project scientists during WWII are evidence of this phenomenon. Nonetheless, in the long run the private sector does a far better job.

Posted by: David Thomson on November 25, 2002 02:59 PM

Julian,
I think you made an interesting point in your post concerning the 5% of GDP that we expend over Canada on health care.

I would argue that every penny of the 14%-15% of GDP we spend on health care provides incentive for innovation. That's a lot of bread! The health care market is always eager to accept a new and better method of healing (meeting consumer demand).

Even expenditures of 9% of GDP should do it.

Furthermore, the market has winner take all characteristics. The best product is purchased and second best is forgotten (more or less).

Unfortunately, the costs for that second best product must be paid. A producer will simply pass as much as possible along to consumers of the winning product (this is why there is a bias towards large pharma. co.s. They can stay alive by doing this).

US R&D does provide a positive externality for the rest of the world. No doubt about it.

If we could eliminate price discrimination policies by producers we could recapture some of the cost of the benefits we are exporting; thus saving the local market some money.

However, innovation must be in the direction of cost saving improvements. Right now incentives are not strong enough for this focus to dominate.

Sometimes when I have this discussion with strong free market advocates they challenge any government induced incentives as being negative. They seem to believe that innovation involves a haphazard process with useful discoveries occurring almost through serendipity.

I think that all government based financing of R&D should be extremely focussed on cost saving technologies only.

Then, whatever we invest can result in improved returns on expenditures; more bang for the buck.

Posted by: E. Avedisian on November 25, 2002 04:01 PM

"impossible to determine how much of that 5% provides incentive for innovation" -- We know that the amount of money going to medical research CANNOT be greater than $70 billion or so, because then it would provide a greater incentive than there is existent for all medical research in the world.
"impossible to determine how changing that number will affect innovation" -- I assumed in my previous post that getting rid of it would reduce all medical research, worldwide, to ZERO. Can you argue that it will reduce it below that level?

I never once mentioned the unequal distribution of property. It's simply that the current system is very expensive without producing very good results, when compared to other countries.

Okay, let me put it this way: let's say there are two grocery stores. One is selling a bottle of orange juice for $1.40. One is selling an identical bottle of orange juice for $1.17. They both promise about equal progress in the quality of the orange juice they're selling. Which would you shop at?

Note: someone else isn't subsidizing the cheaper grocery store: expenditures on medical care are national totals, including government and private expenditures: the cheaper grocery store is just selling orange juice cheaper, and is evidently able to provide it using fewer resources.

Now, that argument doesn't take into account some things, such as difference in the clientelle of the grocery stores, the culture of the grocery stores, or whatever. If you want to disregard my single payer argument, because of inherent differences in the way health care applies to Canadians and Americans, be my guest, but that is basically the crux of my argument: the current system APPEARS to be inefficient vis-à-vis almost every modern alternative that's been tried, with the possible exception of medical practice in Marxist-Leninist dictatorships.

Julian Elson

Posted by: Julian Elson on November 25, 2002 04:02 PM

"impossible to determine how much of that 5% provides incentive for innovation" -- We know that the amount of money going to medical research CANNOT be greater than $70 billion or so, because then it would provide a greater incentive than there is existent for all medical research in the world.
"impossible to determine how changing that number will affect innovation" -- I assumed in my previous post that getting rid of it would reduce all medical research, worldwide, to ZERO. Can you argue that it will reduce it below that level?

I never once mentioned the unequal distribution of property. It's simply that the current system is very expensive without producing very good results, when compared to other countries.

Okay, let me put it this way: let's say there are two grocery stores. One is selling a bottle of orange juice for $1.40. One is selling an identical bottle of orange juice for $1.17. They both promise about equal progress in the quality of the orange juice they're selling. Which would you shop at?

Note: someone else isn't subsidizing the cheaper grocery store: expenditures on medical care are national totals, including government and private expenditures: the cheaper grocery store is just selling orange juice cheaper, and is evidently able to provide it using fewer resources.

Now, that argument doesn't take into account some things, such as difference in the clientelle of the grocery stores, the culture of the grocery stores, or whatever. If you want to disregard my single payer argument, because of inherent differences in the way health care applies to Canadians and Americans, be my guest, but that is basically the crux of my argument: the current system APPEARS to be inefficient vis-à-vis almost every modern alternative that's been tried, with the possible exception of medical practice in Marxist-Leninist dictatorships.

Julian Elson

Posted by: Julian Elson on November 25, 2002 04:03 PM

"They seem to believe that innovation involves a haphazard process with useful discoveries occurring almost through serendipity."

Wow, you are starting to get the idea. Many useful discoveries indeed do occur "almost through serendipity." Many time throughout history the researcher blunders upon a great discovery. Creativity in the arts and sciences is hindered when government is paying the bills. People need to take risks if they wish to accomplish greatness. The public sector is all about covering one's ass and playing it safe.

Posted by: David Thomson on November 25, 2002 04:21 PM

Speaking about the value of serendipity in scientific development. I have not read this book, but it seems quite interesting:

“Serendipity: Accidental Discoveries in Science
by Royston M. Roberts”

http://www.amazon.com/exec/obidos/tg/detail/-/0471602035/ref=pd_sim_books_2/102-5322751-0532101?v=glance&s=books


Posted by: David Thomson on November 25, 2002 04:37 PM

Julian, how do you compare our "results" with other countries'"results"? We have no way to compare "results", in terms of innovation for dollar spent. For all we know, oranges would not exist at all, if the $1.40 price had not given incentive for someone to invent them, in the expectation it would be sold at the more profitable price of $1.40. Thus, the 2nd store's customers gain the positive externality that Mr. Avedisian speaks of. Are you saying that both stores' customers are better off without oranges? Or that if the first store was forced sell at $1.17, and political bodies directed research capital, we would have oranges less expensively? Again, you concede that privately directed capital produces more innovation per dollar invested, and then you proclaim that reducing the amount of capital directed thus would be positive for consumers. To put it another way, the fact that the first store does lots of volume at $1.40 is what prompted oranges to be invented in the first place, and the fact that store 2 sells st $1.17 simply reflects the inability of the inventor of oranges to convince store 2 to sell at the higher price, and the inventor quite rationally concludes that he may as well gain the revenue of the $1.17 sales,given that the large volume of $1.40 sales makes the risk of investing capital to invent oranges worthwhile. If store one decides to sell at $1.17, the inventor of oranges may well conclude to get out of the invention business, since it is no longer worth the effort and risk. How has store one's customers benefited, if, by gaining access to cheap oranges, it forgoes access to the future invention of mangoes, which , after all, are far more delicious?

Posted by: Will Allen on November 25, 2002 04:52 PM

David Thomson said, way back up there, "Can anyone point out a serious medical development resulting from the efforts of the Canadians and the Europeans?"

Here's one: insulin.

But, I can hear his retort now, as he quickly shifts ground... "Yeah, but what have you done for us lately."

Oh, all right then. Fast forward to the 1990s.

* Two McGill University scientists, Drs. Philip Branton and Gordon Shore, discovered biological mechanisms that prevent cancer cells from dying and disintegrating. (Gemin X Biotechnologies)

* When cells in our central nervous system (which controls the functioning of our brain and spinal cord) die inappropriately, as is the case in diseases such as Alzheimer's and Parkinson's and even stroke and spinal cord injury, the damage can be irreversible. Two scientists from University of Ottawa discovered a family of genes that can prevent cells from dying. (Aegera Therapeutics)

* From its incorporation in 1993 by the scientific founders from University of Toronto, GlycoDesign has grown to a company with over 30 patents and more than 100 employees, with over 40 employees holding PhDs or MDs. GlycoDesign is a world leader in the discovery and development of therapeutics based on the properties of carbohydrates (sugars) for the treatment of cancer and cardiovascular, inflammatory and infectious diseases. Traditional cancer treatments kill healthy cells along with cancerous ones through radiation or chemotherapy. GlycoDesign's most advanced program is a novel therapy aimed at inhibiting the growth of abnormal carbohydrates on the walls of cancer cells so they cannot invade healthy cells. The therapy is currently being tested on cancer patients. (GlycoDesign, Inc.)

* Research focuses on novel ways to treat bone and mineral disorders, as well as central nervous system disorders. It has six drugs in various stages of clinical development including its most advanced product, currently in the final stages of clinical trials and aimed at reversing bone loss associated with osteoporosis. This product has an advantage over existing therapies because it actually stimulates the growth of bone, rather than merely halting bone loss. (NPS Allelix Inc.)

* Dr. Freda Miller from the Montreal Neurological Institute and McGill University leads a research team that has discovered stem cells in skin that can make neurons, fat and and muscle cells. These adult stem cells may not normally make these tissues, but can be encouraged to do so easily, leading to the hope that they can be cultivated and used for transplants and to fight disease. Their discovery was published in the September 2001 edition of the journal Nature Cell Biology.

* A team of University of Alberta medical researchers has developed a revolutionary new cancer therapy to induce the body to create an enhanced immune system to destroy cancer cells. This promising new treatment will be used in Phase 1 human clinical trials scheduled for June at the University Hospitals in Edmonton. This breakthrough is the result of research conducted by Dr. Lung-Ji Chang, a Heritage researcher, and his research team in the University of Alberta's department of medical microbiology and immunology. The therapy (immunogene therapy) is the result of a unique combination of two genes and includes the gene (B7-2), never before tested in cancer clinical trials. The phase 1 study will target the most common and aggressive form of brain cancer and a highly aggressive form of skin cancer, and will evaluate the safety and toxicity of the vaccine. Briana Bio-Tech Inc., an Edmonton-based biopharmaceutical company, has licensed the research and is funding the clinical trials and the ongoing research and development for this promising technology for at least the next three years. The company has exclusive worldwide distribution rights of this technology.

...um, okay, sorry, this is getting long. I'll stop now.

Someone else can take a similar light sample from the Europeans.

Posted by: Canadian Reader on November 25, 2002 05:51 PM

Also, this paragraph puzzles me:

""impossible to determine how much of that 5% provides incentive for innovation" -- We know that the amount of money going to medical research CANNOT be greater than $70 billion or so, because then it would provide a greater incentive than there is existent for all medical research in the world.
"impossible to determine how changing that number will affect innovation" -- I assumed in my previous post that getting rid of it would reduce all medical research, worldwide, to ZERO. Can you argue that it will reduce it below that level?"

I think the heart of your argument is that profits are an inefficient way in which to pursue innovation, because 5% of GDP in consumer spending only produces .68% of GDP in investment in R and D. Well, I must say that this escaped me, due to it's obviousness . No sane entity would spend spend an amount equal to 5% of GDP, of their own property, to get back the same 5%. Is there some magical reason to think that publicly allocated capital is subject to less risk, and therefore should not demand the same potential multiple of return? You seem to believe, due to your assumptions as to the return that political entities will recieve from their investments, that having political entities allocate capital investment and control prices produces superior results. There is not a shred of evidence to believe this to be the case. If you think otherwise, go try to buy a Yugo. Your unwarranted faith in the allocative abilities of political bodies is revealed in this comment.
"I happen to think that the government can probably do significantly better than 1/4th as efficiently as private capital markets (probably better than 1/2 as efficiently), especially if such a subsidy program is intelligently designed, gives private research companies and capital markets a role, and doesn't let politicians get too involved in the process of funding allocation."

Julian, the way politicians further their careers is by getting involved in the process of funding allocation. Is it really your expectation that politicians will act in a way that allows potential competitors to threaten their livelihood? Ever hear of the Osprey aircraft? The Crusader artillery system? The Farm Bill? This is rather naive.

Posted by: Will Allen on November 25, 2002 05:58 PM

Will Allen, I have already answered every single comment you make in that post. I've already explained that the $1.17 price reflects the cost of innovation *and* sales at the second store (it would be $0.90 if innovation were ignored). I've already explained that the comparability of effectiveness of innovation across nations is limited, and acknowledge that as a limitation on my argument.

I'm tiring of going over the same points again and again.

If you or David Thomson won't attempt to refute my points, but rather act as if they had never been made, and try to find a hole in my argument by isolating one part of it, attacking it with points I've answered in other parts of it, and act as if I had never factored in factors which I factored in explicitly, I will now respectfully withdraw from this thread.

If you care to declare victory now, go ahead. I won't stop you.

Julian Elson

Posted by: Julian Elson on November 25, 2002 05:58 PM

"I have clearly stated that I believe some forcible transfers, under threat of violence, are legitimate, when it can be shown that failure to transfer would produce greater levels of violence, such as tyranny or anarchy."

By your own incoherent "logic," you advocate the very thuggery you decry.

Since taxation is necessary for the operation of a state, and since ALL taxation and spending for ANY and EVERY purpose BY DEFINITION redistributes income from one party to another, any consistently principled objection to this must be anarchist by definition.

If income redistribution is objectionable, how can a "principle" of "limited" income redistribution for only the means,purposes and goals favored by certain sectors of society combined with "principled" prevention of income redistribution favored by others not be MORE objectionable?

Those who decry income redistribution yet see nothing wrong with such instances of it as rebuilding the Pentagon,the building of more prisons, missile defense,Homeland Security,school vouchers, subsidized middle-class housework, market-distortive across-the-board subsidation of capital gains,the Death Penalty - the judicio-economic equivalent of the Titanic when it comes the the $900 toilet seat syndrome - why, when you add up all of these instances of income redistribution and throw in defense spending, advocates of "limited government" can actually advocate and implement more "real tax and spend agendas" and "redistributions of wealth" than the programs and politicians - "thugs" - they decry!

And with our current return to deficits,we're just starting the second empirical demonstration of that proposition, aren't we?
(How far down did the national debt per capita go down from 1940-1975/80?)

Oh, and a minor little detail: All of our freedoms emanate from redistribution of wealth.

Government - the greatest potential threat to our freedoms, is in any properly functioning democratic context, their supreme guarantour:

No one can find or describe any right or freedom which doesn't, in the final analysis,derive its ultimate credibility in implementation from the threat of force by the government.

Such a threat of force can only exist through collective subsidation by taxation (redistribution of income/wealth by definition).

There is no free freedom lunch, and there is no instance of a free society in human history which has not been so collectively subsidized via redistribution of wealth/resources.

Given dominant special interests' ignoring of middle-class tax exemption decay in favor of subsidizing capital gains of a few, and the current administration's effective use of payroll Social Security taxes of most of us to finance the marginal rate cuts purchased by CEOs through the political system - I believe it is called "redistribution of wealth" - any consistently principled objection to income redistribution must by definition be an anarchist rejection of society itself as an excuse to ignore the socialized inputs - the labor supplied collectively by others through such things as national defense, education and infrastructure - into the creation of our wealth as individuals in the first place.

More concisely, your opportunity to create wealth in the first place is paid for by others. Denying society the right to redistribute its rightful return the way it sees fit (in principle) constitutes advocacy of the very parasitism and theft you decry.

Thus, your commentary fallaciously reads issues of principle into what are in fact issues of expedience.

Minarchism or coherence. Your choice.

Russ Hicks


Posted by: Russ Hicks on November 25, 2002 06:34 PM

E. Avedisian said: "I asked my wife if, had the payment come out of pocket, would she have gone ahead with the testing anyhow?

The answer was "no".

Now my wife is a fine lady with many wonderful attributes. Yet, would her Canadian equivalent have behaved the same? Would the insurance system have let her?"

If you really want to know... her Canadian equivalent would have agreed to pretty much the same thing, if the doctor advised it. And so she should. Because you had insurance, she was able to do what everyone ought to be able to do: protect her daughter.

The Canadian insurance system certainly does support testing in the case of unexplained headaches, because some headaches turn out to be, for instance, brain tumors. Or allergies, or other conditions that actually need attention.

The decision about which tests are advisable ought to be based on the doctor's best judgement about the symptoms, not the patient's pocketbook. If you think you have run into a doctor who orders tests for reasons unconnected with a medical diagnosis, perhaps you should change physicians, just as a Canadian would.

If your HMO will let you, that is.

Posted by: Canadian Reader on November 25, 2002 06:54 PM

My final post on this thread.....

1) Julian is right. The lower expenditures of other countries create the appearance of inefficiencies because there are inefficiencies. As I stated several times, much expenditure in this country is misdirected to innovations that cost more than the benefit derived from consumption. Our free market model is to blame because the health care sector is too fraught with market failures to perform well as a true efficient free market.

2) Will Allen is also correct that a government run system in the U.S. may not allocate resources effectively either. Caveats would include certain foriegn systems that do function well. And VA, Medicare, Medicaid.

3) Those foriegn systems that do function well may do so in part as a result of the innovation brought to them by the American market. Caveats would include the evidence presented by our Canadian reader (see above).

4) Regarding innovation, there should be no special need for incentives. The market is huge and so are the rewards for successful new products.

5) Under our current system much money will continue to be wasted on economically unsuccessful products. If not the government, then who will alter this course? Insurers will simply charge higher premiums, the uninsurance rate will increase..........Better education of the public? Game theory says this will not work under the current insurance model.

6) Health care costs will continue to rise as % of GDP. This bodes badly for the Federal Budget.

Personally, I think a socialized system with some form of free market augmentation, like incentives for positive innovation, is the wave of the future.

Cheers

EA

Posted by: E. Avedisian on November 25, 2002 07:03 PM

Ok, I lied. One last post.

Canadian Reader, If I thought that my daughter was seriously ill I - and my wife for that matter - would have sold our last possession to get treatment for her.

In this case we could have paid out of pocket. But that is not the point.

The point is that neither of us - both reasonably intelligent and well educated individuals - would have paid out of pocket because neither of us really thought that the condition was serious based on the nature of the symptoms. The Doc didn't seem to think it was serious either. In fact, I suspect two ideas were operating 1) the doc fears even the slightest wiff of malpractice and 2) those fancy machines need to be paid for.

If someone who could pay for a service out of pocket (but would not) chooses to consume the service when insurance pays for it, then that person has overconsumed.

The presence of insurance lowers the price of consumption at the point of consumption and therefore leads to over-consumption.

This is one of the core problems with the insurance model of health care delivery. This is further complicated when docs can prescribe all sorts of things not economical (benefits not equal to costs).

That's what I was trying to illustrate.

I do realize that the issue of economics VS. the best possible care for a patient are at the heart of the health care debate. As your response indicated you side with sparing no expense for any patient's care.

If we follow that course, costs will spiral out of control at accelarating rates as we develop new ways to treat more people.

Better information is the key. So far only the insurance co,s are building meaningful databases and analyzing outcomes in useful ways.

Posted by: E. Avedisian on November 25, 2002 07:38 PM

“The decision about which tests are advisable ought to be based on the doctor's best judgement about the symptoms, not the patient's pocketbook”

This is patently absurd. The doctor unfortunately cannot have the last word. Only an uneasy tension between the insurance company and the physician can prevent the system from going bankrupt. Indeed, the fear of lawsuits and nonstop patient pleading is likely to pressure the medical professional to surrender in just about every instance. Once again, human beings are not innately good. There is no such thing as a viable system which ignores the at least metaphorical reality of original sin.

Posted by: David Thomson on November 26, 2002 04:32 AM

“Oh, and a minor little detail: All of our freedoms emanate from redistribution of wealth.”

This is categorically false--and downright nutty. Paying taxes is not the same thing as wealth distribution. Moreover, far too much is made about the Bill Gates of the world. We could tax them 100% and the tax burden would still substantially rest upon the shoulders of the middle-class.

John Rawls just died and I’m sure that he was a very well meaning man. Unfortunately, he did enormous harm and should go down in history as inadvertently one of the most destructive philosophers of all time. Rawls was an economic illiterate who placed far too much emphasis on the nebulous concept of “fairness.” His works are at least indirectly responsible for many of our destructive welfare policies.

Posted by: David Thomson on November 26, 2002 04:51 AM

I'm done here (thanks for the good summation, Mr. Avedisian), but for a final remark to Mr. Hicks. You are correct that certain Pentagon expenditures, etc., can be every bit as thuggish as the Farm Bill, in that they involve the forcible transfer of property from citizen A to Citizen B for no conceivable puplic purpose other than to enrich B. This is what makes B a thug; his willingness to use violence to obtain property from A, which A obtained by voluntary transaction, for purely personal gain. George Bush was a thug when used the powers of eminent domain and sales taxes to enrich himself; a baseball team in a new building in Arlington, VA serves no public purpose, since we can find numerous other cities that function just fine without one. Completely eliminating the Defense Dept., as opposed to eliminating those programs that serve no legitimate public purpose, would mean the destruction of this nation as a functioning society, and result in more pernicious forms of violence, anarchy or tyranny. Therefore, it can be said that the forcible funding of parts of the Defense Dept. is required to avoid greater violence, thus such funding is not thuggish. My dispute with the Mr. Moomaw, which unfortunately became nasty, revolves around Mr. Moomaw's contention that whenever entity A perceives that there is a more prosperous entity B, which A believes is more prosperous for reasons not attributable to A's actions, A has can legitimately use violence to obtain what B has obtained through mutual agreement. As stated above, this is a common attitude among those who spend their days in small rooms encased with steel bars.

Posted by: Will Allen on November 26, 2002 06:02 AM

I'm about done here, too, but for a couple of minor addenda in response to E. Avedisian.

"The Doc didn't seem to think it was serious either. In fact, I suspect two ideas were operating 1) the doc fears even the slightest whiff of malpractice and 2) those fancy machines need to be paid for."

The solution to that, surely, is not to require patients to second-guess their doctors, but to remove the perverse incentives to doctors to prescribe needless tests. If any intelligent layperson could make better, more informed medical decisions than a doctor, what are all those years of medical school for?

The fear of a malpractice suit is definitely a concern in Canada, but not nearly so severe a problem as in the US. Part of the reason might be cultural.

From a public opinion survey presented to the CMPA: "Canadians are distinctly un-American in their views on the role of malpractice suits. Seventy-six percent agree that the threat of a medical lawsuit is important to ensure that doctors act in the best interest of patients, but 54% disagree that suing is the only way to ensure that one's rights are defended. The most important benefit of a lawsuit, in the minds of a majority, is to prevent a similar error from happening to others. [Emphasis added.] The most important negative consequences of lawsuits perceived by respondents were that doctors would avoid treating certain patients, or avoid certain types of practice. Canadians' propensity to sue is directly related to effective communication with their doctor. Asked whether they would sue if a medical procedure left them with a permanent medical problem which may have resulted from an error on the part of the doctor, only 44% would sue for damages if the doctor were willing to discuss the situation openly with them. This climbed to 89% if the doctor was unwilling to discuss the situation with them."

Decide for yourself whether Americans would respond the same way.

As for having those fancy machines paid for... well, yes, if you insist on letting doctors have a financial interest in a lab, there will be a problem. In Canada we'd call that a conflict of interest.

"As your response indicated you side with sparing no expense for any patient's care."

No, not exactly. I side with equality of care independent of the patient's (or a child patient's parents') financial resources, rather than "sparing no expense."

This has been an interesting discussion. Thanks to (nearly) all involved.

Posted by: Canadian Reader on November 26, 2002 10:56 AM

"This is what makes B a thug; his willingness to use violence to obtain property from A, which A obtained by voluntary transaction, for purely personal gain. George Bush was a thug when used the powers of eminent domain and sales taxes to enrich himself; a baseball team in a new building in Arlington, VA serves no public purpose, since we can find numerous other cities that function just fine without one."

Did he move the Ballpark in Arlington to Virginia? That would not only be thuggish but impressive as well.

Of course the very existence of taxation implies forced labor for collective use.

"My dispute with the Mr. Moomaw, which unfortunately became nasty, revolves around Mr. Moomaw's contention that whenever entity A perceives that there is a more prosperous entity B, which A believes is more prosperous for reasons not attributable to A's actions, A has can legitimately use violence to obtain what B has obtained through mutual agreement."

If Capitalist C hires Laborer D to produce product when the labor market is tight, Laborer D will be negotiate better wages than Laborer E when the labor market isn't.

Thus,in the latter instance, Capitalist C earns more profit - is more prosperous - for reasons not attributable to his actions.

A consistently principled objection would be with the existence of taxation itself in the first place, not the structure of benefits and burdens. These are disputes of expedience between advocates of redistribution of wealth.

Taxation itself is arbitrary but there is no way - outside of anarchism - to get around that.

Russ Hicks


Posted by: Russ Hicks on November 26, 2002 12:15 PM

Russ Hicks: "Oh, and a minor little detail: All of our freedoms emanate from redistribution of wealth.”

David Thomson: "This is categorically false--and downright nutty. Paying taxes is not the same thing as wealth distribution."

Please find or describe any instance of taxation which does not secure the results of labor - redistribute income/wealth - from one party to another.

Please find or describe any right or freedom which does not derive its ultimate credibility from a collectively subsidized - through such redistribution of wealth - threat of force.

Please find or describe any consistently principled objection to such redistribution of wealth which does not constitute anarchism.

Anyone who advocates taxation at all for collective use for purposes they find efficacious but who objects to redistribution of wealth for other purposes - say, provision of social insurance for unemployment compensation, welfare, Social Security, EITC, etc. are objecting out of expedience, not principle.

The state nightwatchman is a hypocritical midnight requisionist.

Russ Hicks

Posted by: Russ Hicks on November 26, 2002 12:20 PM

“Anyone who advocates taxation at all for collective use for purposes they find efficacious but who objects to redistribution of wealth for other purposes - say, provision of social insurance for unemployment compensation, welfare, Social Security, EITC, etc. are objecting out of expedience, not principle.”

This is an utterly absurd assertion. Unless, however, you are letting the cat out of the bag? Do you know something the rest of us don’t? Did Franklin Roosevelt con the American people? Social Security is an insurance program. The same holds true for all the other government programs you have cited. Even welfare benefits are supposedly a form of insurance to help those who are temporarily down on their luck. The redistribution of wealth has nothing whatsoever to do with the premise of these programs.

Taxes are an inescapable necessity. A democratic society does indeed employ force to collect these monies from its citizenry. And yes, sometimes a citizen may be justifiably compelled to pay taxes not of their liking. A tax payer, for instance, may despise the design of the new town court house, but cannot rightfully withhold their portion of the taxes required to build this alleged monstrosity. Taxes, though, are simply payments for services rendered. It has absolutely nothing to do with per se wealth distribution. One is paying for their police force, military, and other functions that only the government can adequately perform. Forcing the better off Peter to directly improve the economic circumstances of the poorer Paul is not part of the bargain.

Also, wealth distribution is such a waste of time. It is far better to increase the size of the economic pie. Me thinks that a few people on this discussion board have been seduced into the idea that economics is inherently a zero sum activity.

Posted by: David Thomson on November 26, 2002 01:02 PM

Uh, Russ, get an atlas before you reveal your ignorance via the inept use of sarcasm. There is a community called Arlington, TX, in which the Texas Rangers play baseball. I am done here, and really don't wish to take any more time discussing the inherent differences between a transaction in which parties reach voluntary mutual agreement, those that involve implicit violence, and the difference between using violence in order to prevent anarchy and tyranny, and using violence for purely personal gain. See ya'

Posted by: Will Allen on November 26, 2002 01:07 PM

"A single payer system would probably encourage greater investment in preventative medicine."

A less regulated free market system would also encourage greater investments in preventative medicine, by offering premium discounts for people who regularly take preventative measures and for those who generally live healthy lifestyles.

"The savings due to prevention if coupled with rationing would represent a significant savings, according to some researchers."

Yes, rationing typically does represent significant savings. But the people subjected to it aren't exactly jumping for joy about the savings.

"Make sure you also attach that tag [common thug] to Woodrow Wilson"

I'd be more than happy to :)

"to Jefferson and Tom Paine -- and to the rest of the Founders, who put not a word in the Constitution forbidding the government from taxing ONLY the rich to pay for the military, cops, roads, and public schools."

Actually, the Constitution was designed to forbid the Federal Government from doing everything that wasn't specifically allowed. Including paying for public schools. And health care.

"The real difference is that the single payer socialized systems can ration health care such that the services provided are those that give the most bang for the buck."

Since the "bang" of any product or service is entirely subjective, I don't see how any single socialized system could possibly deliver the most "bang" for the buck with respect to 300 million distinct individuals.

"So much of health care purchased in the US occurs beyond the point of diminishing marginal benefits."

That's an important consideration if and only if one is spending other people's money. If one is spending his own money, or if one is drawing benefits from an insurance policy he previously paid for that covers such expenses, then the question of whether the health care is worthwhile or wasteful is only of interest to the one receiving it.

"I happen to think that the government can probably do significantly better than 1/4th as efficiently as private capital markets (probably better than 1/2 as efficiently), especially if such a subsidy program is intelligently designed, gives private research companies and capital markets a role"

What kind of a role? Unless they're paying the costs and reaping the profits, just giving them a "role" isn't going to make them behave significantly better than any other bureaucrats.

"and doesn't let politicians get too involved in the process of funding allocation."

Well, how about a plan that doesn't let them get involved at all in the process of funding allocation. Let those decisions be made by individuals, and insurance companies that the individuals choose.

"As I stated several times, much expenditure in this country is misdirected to innovations that cost more than the benefit derived from consumption."

That's the way research works. Most ideas don't pan out. Many of the others do some good but fail to pay for themselves. Occasionally, you hit paydirt, and your bright idea pays for all of the also-rans. This may look like inefficiency, but if you knew exactly what to research before-hand, then it just wouldn't be research.

"Our free market model is to blame because the health care sector is too fraught with market failures to perform well as a true efficient free market."

Given that we don't really have a full-blown, honest-to-God free market model, I seriously doubt that the free market model is to blame.

"Under our current system much money will continue to be wasted on economically unsuccessful products."

Again, that's the nature of research.

"If not the government, then who will alter this course?"

No one. That is, unless you really don't want any hope of ever seeing that cure for old age.

"Health care costs will continue to rise as % of GDP. This bodes badly for the Federal Budget."

Especially if we further socialize medicine. If we de-socialize it, then health care costs will be completely irrelevant to the Federal Budget.

Posted by: Kenneth Uildriks on November 26, 2002 01:13 PM

A simple health care proposal: employers stop paying for insurance, and are required to give the money they currently pay for insurance back to their employees in the form of wage increases. Everyone pays an additional flat income tax dedicated to health care. That money goes into a pot which is divided up evenly, and every man woman and child gets a voucher which they can use to buy insurance in the private market, or to buy into existing government health programs, which will now be funded only to the extent that people chose them with their vouchers.

To get around adverse selection problems, private insurers would have to agree to insure all takers, and also to charge the same price for everybody.

So the restributive function of the tax insures that eveyrone has accesss to health care, while consumer choice ensures that market forces still operate. We won't need to debate the merits of single-payer any more. If that's what delivers health care most efficiently, that's what consumers will chose.

comments?

Posted by: RC on November 26, 2002 01:26 PM

Will Allen (Nov 24, 2:16 PM) wrote, "Mark, you take the same tack as Jason, only from the opposite side."

If Jason is taking an opposite tack on what is or is not constitutional, then one of us is wrong. (And I can pretty much guarantee you it's Jason. ;-))

"Railing against what is unconstitutional may be emotionally satisfying, but has little impact on reality."

Do you honestly think that *anything* that's written here has much "impact" on "reality"?

"I think it is unfortunate that state power has expanded to the point that a majority can do whatever it wishes to the minority's property, for whatever purpose it deems fit, but the reality is that it has, and the majority is largely satisfied with this state of affairs."

This simply reflects the fact that the vast majority of people in this country were educated in leftist public schools. As a result, the vast majority have virtually no knowledge of what is inside the U.S. Constitution, or of the history of the United States, with respect to government size.

"Appeals to Consitutionalism will not suffice in persuading a polity that sees such arguments as technical and legalistic,..."

Discussions of constitutionalism only seems "technical and legalistic" to the polity, because they have been (falsely!) taught that the Constitution really can mean anything, much like the Bible. I routinely encounter people who equate my views on the Constitution to views of Christian fundamentalists of the Bible. But there are HUGE differences between the Constitution and the Bible: 1) the Constitution was written in English, only 200+ years ago, 2) the authors of the Constitution are well known, and some extensively documented what the contemporary issues were, and what their goals were, 3) the document was deliberately written for clarity, and 4) we can safely assume that the initial Congresses and Presidents came closer to following the Constitution, in part because some of them actually had a hand in writing it (e.g. Washington, Adams, Madison).

In fact, the meaning of the Constitution is quite clear...especially if one uses such documents as the Federalist Papers to understand key phrases.

The Constitution is clearly being massively violated by the federal government. If you asked a member of the public, "Do you think the government should follow the law?"...I bet the vast majority would answer "yes." But two things they don't recognize are: 1) the Constitution is The Law, and 2) the federal government is massively violating the Constitution.

"...and in any case, such arguments are always subject to reversal whenever a majority of 5 on the highest court says otherwise, or a sufficiently large majority amends the Consitution itself."

The highest court's opinion doesn't change whether federal actions are Constitutional, or not. What's in the Constitution is the sole determinant of whether things are constitutional, or not. And I don't object to a sufficiently large majority changing what's in the Constitution. They should, if what's in the Constitution isn't appropriate.

"You see, the obnoxious Farm Bill that was recently passed is morally illegitimate regardless of what the Constitution says, and it would be so even if the Constitution were explicitly amended to permit such a law."

"Morally illegitimate" is a moral judgement. "Unconstitutional" is a legal judgement. The big difference between the two is that two people can hold completely opposite moral values, and still legitimately claim to be right. (Witness Osama bin Laden's justification of attacks on civilians.) There is only ONE correct legal judgement. The correct legal judgement (as in the Dred Scot case, where slaves were correctly judged to have absolutely no rights under the Bill of Rights) may even be immoral...but still correct.

"I happen to believe that a morally legitimate case can be made to transfer property when it is shown that failure to transfer would give rise to anarchy or tyranny."

Yes, but the Constitution says has nothing to do with what's moral. The Constitution is The Law...regardless of whether or not The Law is moral.

"Health care is a terrific conumdrum because..."

No, there's no conundrum at all. The Constitution does NOT give the *federal* government the power to raise taxes for health care. And the 10th Amendment clearly states that ALL powers not authorized to the federal government are reserved for the "states" or "the people" (i.e., no level of government is given that power).

So while there may be a legitimate Consitutional question about whether STATE governments can set up health care insurance/payment systems, it is beyond question that the federal government can NOT.

Once again, that's a legal matter, not a moral one. If you think it's immoral for the federal government NOT to "help people out" with health care (by taking money from other people), then you should work for a Constitutional amendment to allow the federal government to provide for health care for some people (by taking money from other people).

Posted by: Mark Bahner on November 26, 2002 02:31 PM

"A simple health care proposal: employers stop paying for insurance, and are required to give the money they currently pay for insurance back to their employees in the form of wage increases."

Not bad. Better yet, we simply remove all incentive for employer group health plans from the tax code along with all restrictions on health plans in general (so that a wide variety of policies, each covering different sets of potential medical expenses, will be available on the open market). Then most people will get the cash instead of the health plan.

"Everyone pays an additional flat income tax dedicated to health care."

That's not so good.

"That money goes into a pot which is divided up evenly, and every man woman and child gets a voucher which they can use to buy insurance in the private market, or to buy into existing government health programs, which will now be funded only to the extent that people chose them with their vouchers."

Why should we be distributing these vouchers to everyone? Most people would do fine on their own - government help, if it's offered at all, should be limited to the minority of people that actually need it.

"To get around adverse selection problems, private insurers would have to agree to insure all takers, and also to charge the same price for everybody."

That doesn't make any sense. "Adverse selection" problems can only occur when insurers are required to insure all takers and/or charge the same price for everybody. If insurance companies are free to charge what they see fit, individuals are free to get any desired policy from any insurance company, or not get a policy at all, there can be no "adverse selection" problems.

"So the restributive function of the tax insures that eveyrone has accesss to health care, while consumer choice ensures that market forces still operate. "

You don't need to distribute such huge quantities of resources to everyone in the country to ensure that everyone has access to health care. The only people that are in any real danger of not having access to health care are the poor - people who could reasonably use their own resources without having it funneled through this bureaucracy should be left to do so.

"Did Franklin Roosevelt con the American people?"

Repeatedly.

"Social Security is an insurance program."

Actually, it's a Ponzi scheme.

"The redistribution of wealth has nothing whatsoever to do with the premise of these programs."

Actually, Social Security involves taking wealth from the less fortunate (those who don't live to see 65) and redistributes it to the more fortunate (those who live to a ripe old age). Seems kind of the reverse of what we're told that decency requires.

Posted by: on November 26, 2002 02:48 PM

“"Did Franklin Roosevelt con the American people?"

Repeatedly.

"Social Security is an insurance program."

Actually, it's a Ponzi scheme.

"The redistribution of wealth has nothing whatsoever to do with the premise of these programs."”

The American people may have been conned, but they embraced the social security concept because it was sold to them as an insurance program. They did not think they were engaging in wealth distribution. In many respects, social security has regrettfully devolved into some sort of Ponzi scheme.

“Actually, Social Security involves taking wealth from the less fortunate (those who don't live to see 65) and redistributes it to the more fortunate (those who live to a ripe old age). Seems kind of the reverse of what we're told that decency requires.”

I’m sorry but this is entirely a fallacious argument. Every insurance policy pays to the few who require assistance. None of us, for example, should feel cheated if we never file a claim to our auto insurer.

Posted by: David Thomson on November 26, 2002 03:12 PM

Bruce Moomaw (Nov. 24, ~10 PM writes), "I don't know how may times I'm going to have to hit Mark Bahner and Will Allen over the head with that 2-by-4. If you think that the Constitution rules out income transfer payments of any sort, then you must conclude that it requires that the richest and the poorest American must pay exactly the same total amount in taxes,..."

No matter how many times you do so, Bruce, it won't change the fact that YOU are the one who is wrong. To see this, let's play a little economics game, that first year economics teachers are so fond of:

Case 1: You and I are the only people in the economy. We buy a tank for $100, for our "common defence." I have a higher income than you, so I pay $90 for the tank, and you pay $10. Show me the place where my income has been transferred to you.

Case 2: Again, you and I are the only people in the economy. Again, we buy the $100 tank, with me paying $90, and you paying $10. But let's also say that, in this case, the government requires me to pay $90 for "health care" (and you pay $10). The government gives you my $90 for your health care, and your $10 for my health care. Do you see where the transfer payment occurs? (Hint: It's not for the tank.)

"I rather doubt -- even without that quote from Thomas Jefferson listed above -- that this is what the Founders had in mind, since (unlike a small sprinkling of libertarian fanatics in this country) they weren't morons."

The quote was from James Madison...the "Father of the Constitution"...NOT Thomas Jefferson, the "Father of the Declaration of Independence." Thomas Jefferson wasn't even at the Constitutional Convention (he was in France at the time). And you're right, Mr. Moomaw, the Founding Fathers weren't morons. The closest modern party to the Founding Fathers (except for Hamilton) would be the Libertarians. (The Founding Fathers most likely would have shot modern Democrats or Republicans!)

"Now let us assume a program that gives every American the same amount of a certain social benefit, but taxes them in different amounts to fund it -- and, in the case of the more affluent, taxes them more than they receive from the benefit. This is certainly constitutional; the benefit itself goes to everyone and so (like roads, cops and the military) is connected to "the general welfare" of the people; but different people are taxed different amounts to pay for it."

Sir, I hardly know where to begin! :-( First of all, you need to separate *federal* spending from *state* spending. Of the "roads, cops and military"...the Constitution only clearly authorizes spending for the military. (And spending for "cops" is strictly forbidden to the federal government.) But you *are* correct that it *is* constitutional to tax incomes at different rates, to pay for military spending. (But such spending involves NO "transfer" of money.)

"The reason why you and those like you are full of it morally is more obvious: even with progressive taxation, the rich make the same amount of money with less work effort (sometimes MUCH less work effort) than the rest of us."

See, this is where there may be some misunderstanding. I had simply ASSUMED that all of us here were liberals. As any true liberal can tell you, a liberal doesn't care how hard a person works; as long as the person didn't steal or hurt someone for the money, a liberal thinks the government should let that person alone. "Laissez faire," as the French would say.

http://dictionary.reference.com/search?q=Laissez%20faire

But I'm finding out that not all of us here are liberals. My bad. ;-)

"And the arithmetical result, of course, is exactly the same as taxing only some people to pay benefits only to others."

Show me, in the Case #1 I outlined above, how you received even 1 penny of my money!

"And -- if someone is less prosperous than someone else through no fault of his own -- there is, of course, NO moral argument against his equalizing the situation through forcible property taking, contrary to the bizarre moral fantasies of Will Allen and similar Ayn Randians..."

:-) I'd be interested in knowing how much you make, then. I'm sure I can find plenty of people poorer than you, with guns, that I could steer to your doorstep. But my sense is that you would no longer think it was a "bizarre moral fantasy" for them not to take your property, in order to equalize things.

"...how odd that that hasn't led to the progressive income tax becoming steadily more and more progressive forever. Indeed, the movement over the past half-century has been in the other direction."

That's because there is more and more international competition. Russia--Russia, for goodness' sake--now has a flat tax! (By the way, though, total government taxes in the U.S.--including state and local taxes--are essentially at an all-time high...roughly 1/3rd of GDP.)

"It's interesting that Bahner quotes Lester Thurow in supposed support of his ultra-libertarian position, without mentioning the minor fact that Thurow himself remains an enthusiastic supporter of a very large degree of income redistribution. You might ask why, Mark."

I merely pointed out that Lester Thurow wrote a book that compared the three types of economic development (Japanese, European, U.S.). You're right...Thurow liked anything BUT the U.S. style. But the fact is that, since Thurow wrote the book in the early 1990s, that the U.S. style has produced far more economic growth.


Posted by: Mark Bahner on November 26, 2002 03:22 PM

"You might also note that that "wise man" who said that "a government that robs Peter to pay Paul can always rely on the enthusiastic support of Paul" was one George Bernard Shaw -- a vastly bigger enthusiast for robbing Peter to pay Paul than I will ever be."

I guess that would make you morally superior, then? :-)

Posted by: Mark Bahner on November 26, 2002 03:32 PM

"A less regulated free market system would also encourage greater investments in preventative medicine, by offering premium discounts for people who regularly take preventative measures and for those who generally live healthy lifestyles."

No,no,no! Then you are segregating the market. You then have to consider the group that has unhealthy lifestyles, poorer health, etc. That group would then be priced out of the market. Again, the system works by having some healthy people subsidize the care of some very sick people.

Furthermore, you are not addressing the problem of people switching plans and the original company loosing its investment in the preventative care it paid for.

.And no, you cannot let the unhealthy group suffer the consequences of their choice because they become uncompensated care that must be paid for by cost spreading by providers. They can't be left to die in the streets, after all. They are also the most vocal complainers about the cost of health care.

"Since the "bang" of any product or service is entirely subjective, I don't see how any single socialized system could possibly deliver the most "bang" for the buck with respect to 300 million distinct individuals."

Ever hear of objective analyses like outcomes measures? The insurance companies do them regularly. Often, when a service is denied it is denied on the basis of such outcomes studies, which have found that the marginal benefits are less than the marginal costs. Physicians and patients find against this approach (as to producers like Merk).

"Especially if we further socialize medicine. If we de-socialize it, then health care costs will be completely irrelevant to the Federal Budget."

Some social insurance, such as Medicare, cannot be left to the free market due to markets failing to form (a market failure). No private insurance company is going to offer health care insurance to the aged. It simply isn't economically viable.

"Not bad. Better yet, we simply remove all incentive for employer group health plans from the tax code along with all restrictions on health plans in general (so that a wide variety of policies, each covering different sets of potential medical expenses, will be available on the open market). Then most people will get the cash instead of the health plan."

Market segregation again. Yes some people would end up with more money in their pockets (the young and healthy), but some would pay more and others would be priced out of the market and either suffer and die or loose all they had paying medical bills. Talk about a polital football!

Posted by: E. Avedisian on November 27, 2002 04:22 AM

"I'm sorry but this is entirely a fallacious argument. Every insurance policy pays to the few who require assistance. None of us, for example, should feel cheated if we never file a claim to our auto insurer."

First of all, no one forces us to get collision coverage (unless you use your car for collateral, in which case the car isn't entirely yours and the bank insists that the value of the collateral be preserved). Second of all, growing old is actually the most desired outcome available, so forcing less fortunate people to pay for those that are actually more fortunate is a strange way to run a mandatory insurance program.

"In many respects, social security has regrettfully devolved into some sort of Ponzi scheme."

Devolved? It was designed that way from the very beginning. Like all Ponzi schemes, it started out very profitable for those at the top of the pyramid; unlike most Ponzi schemes, this one can be kept going by bringing in new suckers with the force of law.

"No,no,no! Then you are segregating the market."

Now you're catching on.

"You then have to consider the group that has unhealthy lifestyles, poorer health, etc."

I have considered them. This is the best way to encourage them to change their lifestyles, without violating anyone's rights. Instead of burdening everyone with prohibitions or launching lawsuits against those who purvey unhealthy products to willing consumers (on the premise that they are costing us money), simply leave people to pay the cost of their own decisions, and the law can leave them and their vendors alone.

"That group would then be priced out of the market."

Depends on how much money they make. I never said anything about whether we should subsidize poor people or not (I'd prefer to leave that to private charity), but I would hope that we can at least insist that people who are not poor should be on their own.

"Again, the system works by having some healthy people subsidize the care of some very sick people."

That is one reason why the system works so poorly. It would work much better if this were not the case.

"Furthermore, you are not addressing the problem of people switching plans and the original company loosing its investment in the preventative care it paid for."

What investment? I said that people who got preventative care would have lower insurance rates - because they were less expensive to insure. Their first company would still be making a profit on them at a lower rate the entire time that it covered them - there's no "investment" that it would fail to recoup if they switched plans.

"And no, you cannot let the unhealthy group suffer the consequences of their choice because they become uncompensated care that must be paid for by cost spreading by providers. "

Only if they're poor (see above). If they're not poor, they will pay for their care, and as long as they have resources to pay for their care, the law can compel them to pay up.

"They can't be left to die in the streets, after all."

We leave people to die all the time, mostly in their homes. And we will until someone makes a fortune by bringing that anti-aging drug to market. FDA willing, of course.

"Ever hear of objective analyses like outcomes measures? "

Yes. They assume that each outcome has an objective value, and compare them to the costs. Doesn't mean that the patients see it that way.

Fortunately, in a free market, patients can choose (and pay for) health plans that will pay for either more or fewer procedures, and expend more or fewer resources to preserve their lives in difficult and expensive circumstances.

"Some social insurance, such as Medicare, cannot be left to the free market due to markets failing to form (a market failure). No private insurance company is going to offer health care insurance to the aged. It simply isn't economically viable."

Of course they will. They'll just charge more for it. It all evens out, since they'd charge less for it throughout most of the person's life.

"Market segregation again. Yes some people would end up with more money in their pockets (the young and healthy), but some would pay more and others would be priced out of the market and either suffer and die or loose all they had paying medical bills. "

Again, people who are not poor should be paying their own way. Second of all, if we let the market work the way it's supposed to (including the removal or mitigations on restrictions on the buying and selling of medicine, medical services, etc.), innovations will come faster, today's standard of care will be cheaper sooner, and we might live to see that cure for old age, at which point everyone's insurance costs will be no higher than those of an 18 year old.

Posted by: Kenneth Uildriks on November 27, 2002 04:55 AM

"I'm sorry but this is entirely a fallacious argument. Every insurance policy pays to the few who require assistance. None of us, for example, should feel cheated if we never file a claim to our auto insurer."

First of all, no one forces us to get collision coverage (unless you use your car for collateral, in which case the car isn't entirely yours and the bank insists that the value of the collateral be preserved). Second of all, growing old is actually the most desired outcome available, so forcing less fortunate people to pay for those that are actually more fortunate is a strange way to run a mandatory insurance program.

"In many respects, social security has regrettfully devolved into some sort of Ponzi scheme."

Devolved? It was designed that way from the very beginning. Like all Ponzi schemes, it started out very profitable for those at the top of the pyramid; unlike most Ponzi schemes, this one can be kept going by bringing in new suckers with the force of law.

"No,no,no! Then you are segregating the market."

Now you're catching on.

"You then have to consider the group that has unhealthy lifestyles, poorer health, etc."

I have considered them. This is the best way to encourage them to change their lifestyles, without violating anyone's rights. Instead of burdening everyone with prohibitions or launching lawsuits against those who purvey unhealthy products to willing consumers (on the premise that they are costing us money), simply leave people to pay the cost of their own decisions, and the law can leave them and their vendors alone.

"That group would then be priced out of the market."

Depends on how much money they make. I never said anything about whether we should subsidize poor people or not (I'd prefer to leave that to private charity), but I would hope that we can at least insist that people who are not poor should be on their own.

"Again, the system works by having some healthy people subsidize the care of some very sick people."

That is one reason why the system works so poorly. It would work much better if this were not the case.

"Furthermore, you are not addressing the problem of people switching plans and the original company loosing its investment in the preventative care it paid for."

What investment? I said that people who got preventative care would have lower insurance rates - because they were less expensive to insure. Their first company would still be making a profit on them at a lower rate the entire time that it covered them - there's no "investment" that it would fail to recoup if they switched plans.

"And no, you cannot let the unhealthy group suffer the consequences of their choice because they become uncompensated care that must be paid for by cost spreading by providers. "

Only if they're poor (see above). If they're not poor, they will pay for their care, and as long as they have resources to pay for their care, the law can compel them to pay up.

"They can't be left to die in the streets, after all."

We leave people to die all the time, mostly in their homes. And we will until someone makes a fortune by bringing that anti-aging drug to market. FDA willing, of course.

"Ever hear of objective analyses like outcomes measures? "

Yes. They assume that each outcome has an objective value, and compare them to the costs. Doesn't mean that the patients see it that way.

Fortunately, in a free market, patients can choose (and pay for) health plans that will pay for either more or fewer procedures, and expend more or fewer resources to preserve their lives in difficult and expensive circumstances.

"Some social insurance, such as Medicare, cannot be left to the free market due to markets failing to form (a market failure). No private insurance company is going to offer health care insurance to the aged. It simply isn't economically viable."

Of course they will. They'll just charge more for it. It all evens out, since they'd charge less for it throughout most of the person's life.

"Market segregation again. Yes some people would end up with more money in their pockets (the young and healthy), but some would pay more and others would be priced out of the market and either suffer and die or loose all they had paying medical bills. "

Again, people who are not poor should be paying their own way. Second of all, if we let the market work the way it's supposed to (including the removal or mitigations on restrictions on the buying and selling of medicine, medical services, etc.), innovations will come faster, today's standard of care will be cheaper sooner, and we might live to see that cure for old age, at which point everyone's insurance costs will be no higher than those of an 18 year old.

Posted by: Kenneth Uildriks on November 27, 2002 04:56 AM

Russ Hicks:“Anyone who advocates taxation at all for collective use for purposes they find efficacious but who objects to redistribution of wealth for other purposes - say, provision of social insurance for unemployment compensation, welfare, Social Security, EITC, etc. are objecting out of expedience, not principle.”

David Thomson: "This is an utterly absurd assertion. Unless, however, you are letting the cat out of the bag? Do you know something the rest of us don’t? Did Franklin Roosevelt con the American people? Social Security is an insurance program. The same holds true for all the other government programs you have cited. Even welfare benefits are supposedly a form of insurance to help those who are temporarily down on their luck. The redistribution of wealth has nothing whatsoever to do with the premise of these programs."

Huh? If welfare isn't redistribution - what is?

"Taxes, though, are simply payments for services rendered. It has absolutely nothing to do with per se wealth distribution.”

Taxation is redistribution BY DEFINITION. There is no such thing as taxation which does not constitute income/wealth redistribution.

“One is paying for their police force, military, and other functions that only the government can adequately perform. Forcing the better off Peter to directly improve the economic circumstances of the poorer Paul is not part of the bargain."

In a democracy both get to vote on that proposition. And your Peter/Paul scenario is at odds with your welfare observation, which only furthers my argument.

"Taxes are an inescapable necessity."

Redistribution of wealth is an inescapable necessity.

Poorer Paul's regressive sales taxes are part of the socialized inputs into the creation of Better Off Peter's wealth in the first place. Denying society's right to redistribute its rightful return on this investment constitutes parasitism and theft on Peter’s part. A benefit/burden mix geared to the police protection to protect property in wealthy neighborhoods at the relative expense of community development in a poor neighborhood directly forces the poorer Paul to directly improve the economic circumstances of the better off Peter by in effect subsidizing the better - off Peter's property values. There is NO difference in principle.

Both scenarios describe income redistribution. Both results are arbitrary.

"Also, wealth distribution is such a waste of time. It is far better to increase the size of the economic pie. Me thinks that a few people on this discussion board have been seduced into the idea that economics is inherently a zero sum activity."

That's right. Redistribution of wealth for things like Head Start, education, infrastructure, development of human capital have nothing to do with any hope of effecting and/or taking advantage of long-term productivity gains.

[/sarcasm]
[/banging of head]

Posted by: Russ Hicks on November 27, 2002 08:36 AM

"Some social insurance, such as Medicare, cannot be left to the free market due to markets failing to form (a market failure). No private insurance company is going to offer health care insurance to the aged. It simply isn't economically viable."

Heh, heh, heh! It's hilarious to read the comments of people who have so little knowledge of history!

The completely unconstitutional federal government program know as Medicare was signed into law by Lyndon Johnson, in 1965. (Along with that other completely unconstitutional program known as Medicaid.) SOMEHOW the United States managed to do without federal medical insurance for appromimately 180 years after the Constitution was written. (Obviously, there must not have been any old people until 1965.)

By the way, your economics is pretty sloppy, too. ANYTHING can be insured, for a given price (and with limitations on payouts).

Posted by: Mark Bahner on November 27, 2002 09:46 AM

The fringe libertarians on this thread seem absolutely determined to misunderstand the ridiculously obvious. No, Virginia, I -- and most people -- do not believe that "might makes right" and that you have a moral right to take money from someone else just because you're stronger. Yes, Virginia, I -- and most people -- do think that you have a moral right to take money from someone richer if the fact that you're poorer is not due to laziness on your part -- and most people also notice the little fact that, in every democracy that allows income redistribution, the rich still make much more after-tax money than the rest of us with the same amount of work effort. So where the hell is the "injustice" in allowing income redistribution in democracies?

I do notice that even Mr. Uildreks proposes allowing some degree of income redistribution, in the form of medical assistance for the poor. Fine. The debate should be entirely one of degree -- over who is "poor", relatively speaking, and over how much medical (and other) economic aid various income levels should get. And the very real arguments in favor of keeping income redistribution within some limits are entirely pragmatic and not based on "justice"; they're based on the simple fact that, if you carry it too far, you no longer adequately reward individuals for forms of cleverness which are valuable to society as a whole, and so you end up doing more net harm than good to society. But there is no evidence that the US is anywhere near that point yet -- a fact proved particularly dramatically in 1994, when the supply-siders made fools of themselves over the supposedly harmful effects that would come from Clinton's tax hike on the wealthy -- and one can make an excellent case that western Europe isn't anywhere near that point either; their annual incomes are less, but they also have a lot more vacation time than us. And there is no reason to think that the US, or any other democracy, will advance irreversibly in the direction of excessive income redistribution -- we've been moving back toward greater income inequality since the Seventies, with the support of the voters, and all other democracies routinely move back and forth between the Left and the Right as the voters think appropriate.

By the way, none of the libertarians here ever did say whether they also consider Prof.s DeLong, Thurow and Milton Friedman, Thomas Jefferson and Tom Paine "thugs" for thinking income redistribution moral. I'm waiting, although I must admit that at this point I don't expect a coherent response.

Posted by: Bruce Moomaw on November 27, 2002 06:59 PM

Re:

>>The Constitution doesn't permit Congress to take money from one group, to give to another (for no service rendered).<<

>>The completely unconstitutional federal government program know as Medicare was signed into law by Lyndon Johnson, in 1965. (Along with that other completely unconstitutional program known as Medicaid.)<<

It's generally better to have at least one Supreme Court justice on your side before you start declaring things unconstitutional. Otherwise you wind up in the position of the Sicilian in _The Princess Bride_, who keeps saying that things that have happened are "inconceivable" until people conclude that they "...do not think that word means what you think it means..."

Brad DeLong


Posted by: Brad DeLong on November 29, 2002 10:14 AM

"Really, Mr. Bahner? How odd that no US court, before or after FDR, has EVER concluded that the Constitution outlaws income redistribution."

So U.S. courts don't follow U.S. laws. Tell me something I don't know!

Read this assessment for yourself. It's written by someone who is actually IN the (unconstiutional!) Social Security Administration:

http://www.ssa.gov/history/court.html

The overwhelming proponderance of evidence is that Social Security is unconstitutional, as may be seen even from that account:

"The constitutional basis of the Social Security Act was uncertain. The basic problem is that under the "reserve clause" of the Constitution (the 10th Amendment) powers not specifically granted to the federal government are reserved for the States or the people. When the federal government seeks to expand its influence in new areas it must find some basis in the Constitution to justify its action. Obviously, the Constitution did not specifically mention the operation of a social insurance system as a power granted to the federal government! The Committee on Economic Security (CES) struggled with this and was unsure whether to claim the commerce clause or the broad power to levy taxes and expend funds to "provide for the general welfare," as the basis for the programs in the Act. Ultimately, the CES opted for the taxing power as the basis for the new program, and the Congress agreed, but how the courts would see this choice was very much an open question."

Just read the @#$% quote from James Madison:

"I cannot undertake to lay my finger on that article of the Constitution which granted a right to Congress of expending, on objects of benevolence, the money of their constituents."

http://www.conservativebeacon.com/essays/Liberalism/lib_vs_lib.htm

Do you think Madison ("the Father of the Constitution") didn't know what the Constitution said???!!

Posted by: Mark Bahner on December 1, 2002 02:22 PM

"It's generally better to have at least one Supreme Court justice on your side before you start declaring things unconstitutional."

I have at least 2 Supreme Court justices on my side in the matter of Social Security alone. The decision wasn't unanimous...even after FDR tried to pack the Court, so they'd violate the Constitution like he wanted them to!

Dr. DeLong...the Constitution is not a complicated document. Read it yourself. Read the Federalist Papers, to see what the men who were writing the Constitution were thinking. Look at the HISTORY of federal government spending...both amount of spending, and the types of programs being financed.

If you honestly do that, I don't see how any intelligent man such as you certainly appear to be, could disagree. Currently, the federal government is MASSIVELY violating the Constitution. The first significant violations started in WWI. Then, there was a huge jump upward in the New Deal (virtually ALL of which was unconstitutional...as everyone KNEW, until the Supreme Court caved in 1937), and it has simply continued ever since.

I'd be happy to debate this matter. As I said, there really isn't any doubt.

Posted by: Mark Bahner on December 1, 2002 02:34 PM

I am responding (a bit late, I suppose) to David Thomson's remarks about Canada and other nations' supposed parasitic dependency on the US military, particularly when it comes to the War On Terrorism.

Reading his carping letters, one might assume that his nation really desires the creation of dozens of other wealthy military superpowers. So it's difficult not to suspect Thomson, and the many other commentators that take a similar line, of bad faith when the United States' official military strategy is one that openly agitates against the emergence of ANY other rivals. Even if such an emergent power were a European or Canadian ally, the strategy would not alter. Remember that, some time ago, Colin Powell openly admitted that the US wants a monopoly on the unilateral use, or threat, of military force ("the bully on the block" were his politic words, I think.) Canadian forces were in both Iraq and Afghanistan,in token strength, admittedly. But would the US have tolerated a military contribution from another country that wasn't a token?

Does Thomson seriously mean to say that the US maintains its colossal military establishment from geopolitical altruism? If so, which I doubt, how -- to speak in narrower terms -- is such selflessness consistent with a conservatism and realpolitik which states that the overriding motive behind a state's foreign policy must be self-interest? Bill Clinton was ceaselessly ridiculed by America's conservative windbags for any military action (e.g., Kosovo) that could be even remotely interpreted as altruistic, i.e., 'self-righteous' and 'globalist'.

Finally, even given Canada's laughably weak military (a circumstance deplored, by the way, by the great majority of its citizens), what has any of this to do with what it spends on Medicare? Thomson's already granted that, as a percentage of GNP, Canada spends LESS on health care than the US. Again, unless he's simply not thinking, he's arguing in bad faith (emotionally and self-pityingly, too, I might add.)

Posted by: Richard MacLean on January 11, 2003 08:39 PM
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