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It's all about the rents, part one million and five

Matt Yglesias really is a stupid, dishonest tool:

But the shape of the problem is very simple and it looks like this:

1. The public sector has assumed responsibility for financing the health care of old people.*

2. The cost of health care relative to the rest of the economy is rising.

3. The proportion of old people relative to the rest of the population is rising.

This trend bodes ill for our [who's?] fiscal future. And thinking about solving it is enough to make one’s head hurt. As we saw during the debate over the Affordable Care Act, it’s very difficult to pass measures that reduce the incomes of doctors, the profits of medical device makers, the profits of pharmaceutical firms, or the incomes of hospitals And yet it’s difficult to see how you could reduce health care without reducing the revenue flows that go to medical professionals and the firms that employ them. It’s a big problem [sighs].

Gee, in Matt's list of people and institutions whose incomes would be reduced by real health care reform (e.g., single payer), do you notice one that's missing?

Like the health insurance companies? Who take thirty cents of every health care dollar? If Versailles insists on spending $350 billion dollars a year, at least, on rent-seeking health insurance companies who add nothing of value to any of their transactions, of course we're going to have fiscal issues -- even accepting the deficit terrorist framework, which I don't. It really is "very simple"!

Who was it who said that evil was a failure of the imagination?

Oh, and I love the headline:

The Unavoidability of Long-Term Austerity

It's not going to be unavailable for you, now is it, Matt boy?

NOTE * I love the locution "old people." Don't you?

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basement angel's picture
Submitted by basement angel on

because Digby is just too radical (not to mention that she's old people), this logic is inevitable. Everybody has to reduce their incomes except the people who are completely unnecessary.

CMike's picture
Submitted by CMike on

Even if private providers devour 30 cents of every premium dollar they collect, which is at the high end of the credible estimates I've seen, they handle well under 40% of all health care dollars. (See the Health and Human Services Where it Came From chart here.)

Administrative costs for Medicare as a percentage of its costs would go up under Medicare for All because the current payout for the average beneficiary is much higher than it would be under the expanded system and therefore the current fixed per person administrative costs are a lower percentage of total costs than they would be if healthier people were in the program. I think Medicare administrative costs are at around 3% of the program now.

According to Health and Human Services, 2008 total health expenditures were $2.3 trillion, or $7681 per person and 16.2% of Gross Domestic Product. Private health insurance handled $781 billion of that. Those numbers suggest it'll be tough to find $350 billion worth of administrative and executive pay and dividend savings out of private insurance dollars. Granted, I don't know where the private insurance costs from Medicare Part C and Medicare Part D fit in to these numbers. Wikipedia says the private "hold" for Medicare Part C is just under 17%.

I think proponents for single payer health care make a more effective case when they argue using numbers that even their opponents have to concede are correct.

sisterkenney's picture
Submitted by sisterkenney on

"therefore the current fixed per person administrative costs are a lower percentage of total costs than they would be if healthier people were in the program."

Submitted by lambert on

Yglesias's framing -- the focus on delivery of (allegedly) too costly care, as opposed to structural reforms to eliminate rent-seeking -- was constantly used throughout the HCR debacle. If that's not what the Dartmouth Atlas was all about in its nuanced academic presentation, it was certainly what it was all about in political discourse. So I'd say that rather than these points not being "discussed much," they've been beaten into the ground, as conventional wisdom generally is.

As for the administrative costs, $350 billion a year in savings is probably an underestimate; perhaps that's the one to use.

CMike's picture
Submitted by CMike on

Maybe I've been reading Dean Baker too uncritically. In addition to private sector insurance costs wasting $100 billion a year, he says:

While many issues on controlling [health care] costs are complicated, some are very simple. At the top of the list is bringing the price of drugs, medical equipment and medical supplies down to their competitive market price.

Under the current system, patent monopolies allow drug companies and the manufacturing of medical equipment and supplies to charge prices that are often several thousand percent above the free market price. In the case of prescription drugs, the vast majority of drugs could be sold profitably as generics for just a few dollars per prescription, if there were no patent protection. Instead these drugs can sell for hundreds of dollars or even thousands of dollars per prescription.

The huge gap between the patent-protected price and the market price leads to the sort of corruption predicted by economic theory. Pharmaceutical companies mislead doctors and the public about the effectiveness and safety of the drug. They give kickbacks and even bribes to doctors for prescribing their drugs in addition to spending vast sums on marketing. And they spend a fortune lobbying Congress to get their patent monopolies extended and strengthened....

We are also stuck with an over-supply of highly paid medical specialists, many of whom draw salaries in the range of $500,000 a year. We will not be able to support these people in the style to which they have become accustomed indefinitely.

Because of the enormous power that these interest groups wield in Congress it is unlikely that they will be effectively challenged through legislative measures any time soon. Our best hope for reining in their power actually lies with the market: specifically through medical tourism.

We are the only country in the world that is saddled with such a corrupt and dysfunctional health care system. As a result there are enormous potential savings from taking advantage of more efficient health care systems elsewhere.

There are now facilities in India and Thailand that provide top quality medical care at prices that are often less than one-tenth as high as what people will pay in the United States. For medical procedures that can cost more than $100,000 or even $200,000, the gap is large enough to allow a patient, as well family members, to travel great distances and recuperate abroad, and still save enormous amounts of money.

As a result, medical tourism is a rapidly growing industry. This should be encouraged. Progressives should embrace free trade and the market. We can give all the proponents of "free trade" and market fundamentalism the opportunity to be true to their principles. Public and private health care plans can be opened up to allow patients to get medical care that meets U.S. standards in other countries.

It may be that discussion of the issues Yglesias raised is "what the Dartmouth Atlas was all about in its nuanced academic presentation" but I would have to count myself among, what I take it is, the minority of Americans who haven't been running across references to those particular studies "much."

Submitted by lambert on

But the central discussion should be, and of course is not, who will bear the pain of the cuts. That's the "alleged" part.

The DA crapola is a subset of the conventional wisdom about this topic, which I would be amazed that you did not hear last year. The "old people are too expensive to give the level of care that we've been giving them," and we'll cut that rather than profits, bonuses, salaries, and overhead is the agenda for most of the discussion. It's entirely unsurprising the Yglesias would replicate that here.

CMike's picture
Submitted by CMike on

As we saw during the debate over the Affordable Care Act, it’s very difficult to pass measures that reduce the incomes of doctors, the profits of medical device makers, the profits of pharmaceutical firms, or the incomes of hospitals. And yet it’s difficult to see how you could reduce health care [costs] without reducing the revenue flows that go to medical professionals and the firms that employ them. It’s a big problem.

I don't think he was saying Medicare patients should be getting less care -- at least not in this post.

S Brennan's picture
Submitted by S Brennan on

Learned to whore early...and often.

Need to invade Iraq for political reasons, put a call into "left" blog-a-stan, Matt Y, Ezra K, Kevin D...oh and get Jon A over at Newsweek...yeah, he's too old to be a blogger, but I wouldn't want him feeling left out.

nihil obstet's picture
Submitted by nihil obstet on

is a non-productive, coddled super-rich. No point in arguing on the grounds of the tapeworms and their lackeys. Their belief in the virtue of inflicting pain is impervious to any rational argument. Even the very mild, very centrist Krugman is making no headway against the slavering sadism that longs to impose suffering on the sick, old, and otherwise weak peasants. So I'd argue that the government can absolutely not afford to let estates go untaxed, or to let regressive taxes shelter the pile of accumulated cash from necessary social uses, or to throw money into hundreds of overseas military bases, outfitted with ridiculously priced, unusable equipment.

basement angel's picture
Submitted by basement angel on

arguing that one of the pleasures of going to heaven is watching the torture of the damned below.

Card-carrying_Buddhist's picture
Submitted by Card-carrying_B... on

is to make them so expensive people can't afford them.

BCBS is doing that right now with their $4K deductible plan that costs $6K to buy, and then won't pay for anything until you've paid $4K out of your pocket. Which probably one won't do, unless one has an extra $4K hanging around.

What a racket.

beowulf's picture
Submitted by beowulf on

Those numbers suggest it'll be tough to find $350 billion worth of administrative and executive pay and dividend savings out of private insurance dollars...

Insurance companies make profits by denying care. If they deny coverage or cancel a policy on person with a treatable chronic condition but who must suffer without care untilt hey're so sick the ER is obligated to treat them for their emergency and then will release them (unless they die first).

The insurance company share of healthcare spending does not reflect the money its has saved money by pushing the costs onto others-- the ER has incurred uncompensated treatment costs and of course the patient's cost in pain, suffering and/or early death, the EPA and OMB have set the economic value of a human life (for cost-benefit analysis purposes) at $6.9 million. Per Harvard Public Health study, 45,000 Americans die annually due to lack of insurance, that's $310 billion in annual costs (a death tax if you will) NOT reflected in insurance industry revenue figures.

If Medicare for All simply adopting the VA's Federal Supply Schedule price for drugs and medical devices, that step alone would cut national healthcare spending by well more than $40 billion. There's your $350 billion, any other "administrative and executive pay and dividend savings" you find is just gravy.

CMike's picture
Submitted by CMike on

that every human life is priceless and if we spent twice the $2.3 Trillion on health care that we spent in '08 we'd be infinitely wealthy?

CMike's picture
Submitted by CMike on

that the $350 billion savings you were talking about comes from the value of lives saved and not from spending less on health care?

Submitted by lambert on

I'm pointing out that the "...we'd be infinitely wealthy" formulation doesn't seem to have any relationship to the points raised on the thread. That's what "off point" means.

CMike's picture
Submitted by CMike on

As far as where you find additional savings for the system from doing away with private sector insurance, doctors and hospitals would be free of their costs for submitting claims and fighting for payments thereafter.

DCblogger's picture
Submitted by DCblogger on

because we have a model. We can argue about how Medicare for All might work, or we can look at an actual real life example. The refusal of all these Versailles stink-tank studies to look at an actual example is proof of their bad faith.