Steel City Cowboy

Friday, July 24, 2009

Misplaced Compassion

Does anyone bother fisking Krugman these days? Doubtful. If it hadn't been for one of our friends sending Joy a link with a positive admonishment about this column, I wouldn't have bothered. However, after reading something of such colossal and fancible horror as this, I am compelled to respond. And so:

Fisking "Costs and Compassion -- by Paul Krugman"

The talking heads on cable TV panned President Obama’s Wednesday press conference. You see, he didn’t offer a lot of folksy anecdotes.
Right. There is a well known causative correlation between folksy anecdotes and cable TV punditary approval. Oh wait -- he's setting up his "Obama rulez Bush droolz" point for later.
Shame on them.
Yeah -- shame on them for criticizing the President's lame performance and meandering, vague responses when he's working for the cause. Aren't you on board, commrades?
The health care system is in crisis. The fate of America’s middle class hangs in the balance.
A crisis, and the very fate of the middle class you say? According to whom, and by what metric? In general, the word "crisis" connotes an impending disaster. And, while the Federally funded Medicare program certainly faces the result of its structural shortcomings a couple of decades from now, no portion of our nation's healthcare system can be said to be currently in "crisis." This is a buzzword used in the same way that used car salesmen tell you that it's urgent that you drive that car off the lot TODAY. So, any arguments that Krugman presses in the rest of this piece that are based on urgency fail, on their face.
And there on our TVs was a president with an impressive command of the issues, who truly understands the stakes. Mr. Obama was especially good when he talked about controlling medical costs.
Hagiography. Irrelevant.
And there’s a crucial lesson there — namely, that when it comes to reforming health care, compassion and cost-effectiveness go hand in hand.
Okay -- we're finally to his premise: "compassion and cost-effectiveness go hand in hand." Let's see how well he does supporting that postulate.
To see what I mean, compare what Mr. Obama has said and done about health care with the statements and actions of his predecessor. President Bush, you may remember, was notably unconcerned with the plight of the uninsured. “I mean, people have access to health care in America,” he once remarked. “After all, you just go to an emergency room.” Meanwhile, Mr. Bush claimed to be against excessive government expenditure. So what did he do to rein in the cost of Medicare, the biggest single item driving federal spending? Nothing. In fact, the 2003 Medicare Modernization Act drove costs up both by preventing bargaining over drug prices and by locking in subsidies to insurance companies.
He's off to a piss poor start. First, President Obama hasn't actually done anything yet, so we can't really compare what he has "said and done" -- only what he has said. The quote from President Bush, while appalling to a certain group of people, is in fact accurate. And, while our previous President claimed to be against excessive government expenditure as Krugman notes, his actions in no way bore that out. If one is only familiar with liberals and liberal circles of friends (like, say, Krugman), one might not understand the fact that most conservatives and Republicans supported President Bush mostly on the basis of his foreign policy and were either ambivalent or openly hostile to his excessive domestic spending. Of course, one thing that Krugman decides to skip, because it shoots his argument in the ass, is the Medicare prescription drug program. This was a Bush initiative (bastard), and drastically increased Federal Medicare spending. From a liberal standpoint it was extremely compassionate -- hundreds of thousands of seniors could now "afford" drugs that they could not before. But where was the cost-effectiveness? It's no wonder Krugman chose to only mention it in the most tangential fashion.

Secondly, it does not matter what previous Presidents have said or done on the topic, unless they have tried something that worked particularly well or failed particularly awfully. President Obama's ideas must rise or fall on their own merit. Claims of "the last guy was horrible!" are completely irrelevant.
Now President Obama is trying to provide every American with access to health insurance — and he’s also doing more to control health care costs than any previous president.
To what kind of health insurance is President Obama trying to provide access? Is it going to be any good? Is it going to be as good as, say, service from PennDOT? Or the IRS? I can say that I want to provide everyone with access to a car, but if that car turns out to be a Ford Pinto it's not really that great of a goal, is it? So, by making an extremely broad statement, the President is able to let everyone write into it what they would like to imagine. And, when he shows up with a fleet of Pintos, be able to say "But this is what you asked for!" Beware the man who says that everyone can drive a BMW, and that it will only cost everyone half as much if we all do it.

As far as "doing more to control health care costs"... please. He hasn't actually done anything. Basically he has said "We need to control the cost of health care. We will do it." That is stating a goal. Stating a goal is not the same as doing something. I can say that I'm going to pole vault in the next summer Olympics, but it's probably not going to happen. On the other hand, President Carter not only stated that he was going to control gas prices -- he actually did something about it! And look how well that worked out. I can't wait until President Obama tries to bend the laws of nature in a similar fashion with our health care.
I don’t know how many people understand the significance of Mr. Obama’s proposal to give MedPAC, the expert advisory board to Medicare, real power. But it’s a major step toward reducing the useless spending — the proliferation of procedures with no medical benefits — that bloats American health care costs.
He's right. I don't understand the significance. However, Krugman doesn't explain it, which means one of several things. 1) He doesn't understand it himself (probably not the case). 2) He doesn't want to say because it is detrimental to the overall liberal goal of a de facto single payer system. 3) He was near his column's word count and had to cut something. So, since he's unwilling or unable to actually describe what makes it so awesome, asking us to take his word for it (argument from authority), we'll have to discard it.
And both the Obama administration and Congressional Democrats have also been emphasizing the importance of “comparative effectiveness research” — seeing which medical procedures actually work.
This type of research is probably a good thing, but who do we want to have doing it? Do we really want a governing body that decides who can and can't have certain treatments? Once you get into that territory, you run a lot of risks. People start to game the evaluative procedures, lobby, play politics, etc. Personally, I would rather have innovative physicians -- physicians are the ones that come up with new treatments, by the way -- focused on actually coming up with great new medical techniques that might save or extend my life or the lives of my loved ones in the future, instead of, say, wondering how they can game their results to pass the cutoff of a top-level government panel. The truth is that almost all of the treatments we take for granted today began their existence as expensive, experimental procedures. Their effectiveness increased over time as doctors became more familiar with their ins and outs and more practiced in their delivery. Their costs fell as they became more common and eventually commoditized. Sit an effectiveness review board on top of a decreasingly privatized insurance system, and you can say goodbye to innovation.

One suggestion I recently saw seemed to make sense. It was a recommendation for a reviewing organization along the lines of the National Highway Traffic Safety Administration. The NHTSA has no legal or regulatory authority whatsoever. They are also generally staffed by people of professional integrity whose goal is to test, analyze and report the facts as they discover them. They learn things, and publish recommendations on a variety of transportation safety topics. Everyone is free to take their expert advice or not. Most people respect them, their mission and their results. I would not be averse to something of this nature, but the important thing is that it would have to have no regulatory authority.

The notion of having a board that decides with authority what is effective and what is not comes from the same fundamental conceptual flaw that generally governs liberal tax policy -- assuming a static system. When adjusting tax rates, the government can never really be sure what will happen. Of course, that doesn't stop them from assuming static systems such as "if we raise the income tax an additional percentage point, we'll get one percent more revenue," completely oblivious to the fact that edge cases will alter their behavior, sometimes significantly altering outcomes. Sure, if somehow medical technology froze right where it is today, this would make some kind of sense. But the field of medicine, like our economy in general, is made up of dynamic actors who change their behaviors in reaction to changes in the playing field. Like the economy and the adjustment of tax rates, our medical system is complex enough that to make fundamental changes to it will most likely not result in the exact behavioral alterations that your giant-brained advisors had promised you.
Many health care experts believe that one main reason we spend far more on health than any other advanced nation, without better health outcomes,
Bullshit. I'm assuming that Krugman is narrowly reading life expectancy statistics for this "without better outcomes claim." I've seen that before, and it's dishonest. If that's the case, and since he doesn't source his comment we'll just have to assume it is, he's implying that longevity is the single best way to measure the relative effectiveness of varying health care systems. Krugman makes the mistake of supposing that incremental gains in life expectancy once you've passed a certain level of basic civilization (antibiotics, handwashing, sewerage, etc.) is dependant on health care. There is no evidence that it is. What if aging and the eventual end that we all face at its hands is statistically consistent across populations? If so, then once the basics of civilization are achieved, longevity becomes an increasingly poor measure of health care. Better measures would be: length of wait to receive care, quality of life with illness, days lost to illness or injury after the decision to seek care is made, days ill/injured verus days well. If you really think that we don't have better outcomes, why don't you try getting breast or prostate cancer in these other "advanced nations" and see how you fare? Would you like a fifty percent lower survival rate (breast) or a four hundred percent lower rate (prostate)?

The "no better outcomes in the U.S." notion is a canard, based on a few cherry-picked statistics.
as is the fee-for-service system in which hospitals and doctors are paid for procedures, not results. As the president said Wednesday, this creates an incentive for health providers to do more tests, more operations, and so on, whether or not these procedures actually help patients.
This is ridiculous. Does any health care provider (doctor, hospital) in the world get paid per outcome? Please show me where that is and how well it's working. Until then, I'd prefer that we don't gamble a significant portion of our economy -- not to mention our very lives -- on a completely untested approach that these geniuses think might be a good idea. Of course, the immediate flaw in fee for outcome that springs to mind is that doctors and hospitals will be significantly less likely to want to perform risky procedures, or even ones that don't pay off. Krugman's an economist so he should get this pretty easily. If you do x procedures a month, 85% of them succeed and you only get paid for successful procedures, what do you think happens? Do you think that perhaps the cost of performing those failed procedures, which is the same to the provider regardless of outcome, might get rolled into the bills of the successful procedures? Well, you say, we'd just make that illegal! Then you find yourself in a situation where doctors and hospitals will only perform the most certain procedures in their books. Well, you say, we'd just mandate that they perform them! You can keep going down that road until doctors work at the point of the government's gun. Now where have we seen that before? So, say goodbye to progress. On the other side, providers that choose to perform less-than-sure procedures will quickly find themselves out of business, because they can't charge for a significant portion of the work that they do. Either way, it's very very bad for everyone who needs health care, which is... every single one of us.
So where in America is there serious consideration of moving away from fee-for-service to a more comprehensive, integrated approach to health care? The answer is: Massachusetts — which introduced a health-care plan three years ago that was, in some respects, a dress rehearsal for national health reform, and is now looking for ways to help control costs.
Massachusetts' plan is a disaster. It meets the liberal goal of universal coverage though, so people like Krugman will happily gloss over it. And of course it's now looking for ways to control costs. What is wrong with these supposedly intelligent people who don't understand that when you present something that is obviously valuable (health care) as though it were free or seriously discounted (universal coverage, government plans like Medicare, etc.) people will hoard it. In the case of a service like health care, hoarding behavior shows up as over use. Unnecessary use. And, when you have people overusing a limited a resource, what happens to its price? It goes up. Do I even need to say "Duh" here? More on this at the end.
Why does meaningful action on medical costs go along with compassion? One answer is that compassion means not closing your eyes to the human consequences of rising costs. When health insurance premiums doubled during the Bush years, our health care system “controlled costs” by dropping coverage for many workers — but as far as the Bush administration was concerned, that wasn’t a problem. If you believe in universal coverage, on the other hand, it is a problem, and demands a solution.
Dropping coverage, while tough for individuals, is the system's way of controlling the balance between supply and demand. No one has ever said that markets were compassionate. On the other hand, any attempt by the government to inject compassion into the equation -- especially in the form of universal coverage -- will quickly get a lesson in basics economics when costs begin to rise even more quickly than before. It's compassionate for a little while, until the system collapses under the weight of its fundamental flaws. After that, everyone's screwed. Funny, that sounds like another system that was touted to be compassionate, caring about the little guys, etc., for quite a while. And then it went to shit and crushed everyone in it's path. What was that called? Was it... communism? Yeah. It was. The same bunch is pushing for this, apparently because they understand neither history nor basic economics.

So, I guess it comes down to how you want to take your chances. Do you want to take the gamble that as the health care market corrects itself over time (and it will), you'll be able to do for yourself and those around you by your own merit? The limits of the market-based health care system are that if you find yourself in certain income ranges and without a job, getting health insurance probably isn't going to happen. But your fate is in your own hands. Perhaps you get a different job (acknowledgedly difficult)? In this country, if you really need to make more money, you can almost certainly do it. You might not like what comes along with it (more hours, less family time, doing something you don't like, etc.), but you CAN do it. It's an option, and the choice is yours. But the "universal coverage/single payer" people like Krugman will tell you that you don't need to make that choice. In fact, they claim that it is immoral for people to have to make that choice, and in your gut you may agree with them. It feels crappy that the world is full of tough choices. But they claim that they have a solution. The problem is that their solution has systemic flaws that in the end reduce the quality of health care, in some cases drastically. When their blue ribbon panel decides that that cancer treatment for your Dad just isn't effective enough to waste public funding on, what can you do? Getting an exception from the Federal government is like getting light from mud. It just isn't happening. The worst part of that situation is that there is nothing you can do. You can't take a second job to pay for something extra, regardless of the tradeoffs that might require. There is nothing extra. You're just screwed.
Beyond that, I’d suggest that would-be health reformers won’t have the moral authority to confront our system’s inefficiency unless they’re also prepared to end its cruelty. If President Bush had tried to rein in Medicare spending, he would have been accused, with considerable justice, of cutting benefits so that he could give the wealthy even more tax cuts. President Obama, by contrast, can link Medicare reform with the goal of protecting less fortunate Americans and making the middle class more secure.
Ah, just has to throw in the most wonderful leftist class warfare "tax cuts for the wealthy" turd, doesn't he? When treatments are new and very expensive, who gets them? Who pays cash for them? The... wealthy? What happens to those treatments over time? If they prove effective in the field, they become more popular, and their cost goes down. Eventually, it becomes something routine like angioplasty. Who do we have to thank for routine miracles like that? Who essentially funded them in their infancy? It couldn't be the wealthy, could it? Because, like, they're evil or something.

And I'm not even sure what it means to "link Medicare reform with the goal of protecting less fortunate Americans and making the middle class more secure." Sounds like a good mission statement though.
As a practical, political matter, then, controlling health care costs and expanding health care access aren’t opposing alternatives — you have to do both, or neither.
Just a restatement of his premise, which is clearly lacking.
At one point in his remarks Mr. Obama talked about a red pill and a blue pill. I suspect, though I’m not sure, that he was alluding to the scene in the movie “The Matrix” in which one pill brings ignorance and the other knowledge. Well, in the case of health care, one pill means continuing on our current path — a path along which health care premiums will continue to soar, the number of uninsured Americans will skyrocket and Medicare costs will break the federal budget. The other pill means reforming our system, guaranteeing health care for all Americans at the same time we make medicine more cost-effective. Which pill would you choose?
I really hope he wasn't referring to The Matrix. If he was, he's an idiot. The President recommended the "blue pill" in his speech, which in the movie was the path to ignorance. The Red Pill, though certainly the less compassionate road, was the eventual road to knowledge and self-actualization. Oh wait -- maybe he did get the reference correct after all.

Contrary to Mr. Krugman's flawed premise, this is not about compassion at all.

The problem of rising costs in health care is systemic, and not due to the reasons stated by the Obama administration and their friends in Congress and the press. It is also relatively simple. In any economic system, artificially reducing, removing or obscuring the cost to the endpoint consumer of a valuable good always results in an increased demand for that good. This is why stores hold sales, why rebates move merchandise, and why KFC had to put after-the-fact restrictions on its free chicken coupons a couple of months ago. An increase in demand without a consequent increase in supply raises the cost. That's the bedrock of economics. Sadly, when costs are routinely hidden, it creates a feedback system in which the good becomes even more costly, and its value in the eyes of the consumer is increased that much more -- the perceived value compared to the felt cost rises -- creating an incentive for even greater consumption. At some point, you either run out of goods or are unable to provide as much service as consumers request.

There is no doubt that the poorest people in our country are hurt by the quickly rising cost of even basic health services. But the real question shouldn't be "how can we cut them a check so they can afford it" but "why are the costs rising so much more quickly than general inflation?" One reason for that rise in cost is simple and obvious: the development of new procedures and drugs is very expensive, and consumers demand progress. The other is the previously stated economics of felt cost versus perceived value. Each of these problems have fairly simple solutions, although they fly in the face of liberal "compassion," and addressing the latter actually helps with the former.

As a whole, Americans actually do pay for their health care. They do it in the form of co-pays and sometimes deductibles, but the vast majority of that outlay comes in the form of "employer provided" health insurance. The problem is that that cost is simply not felt.

The notion that your employer somehow provides the insurance is misleadingly falacious. A more accurate way to phrase it is that your employer is acting as a reseller for the health insurance companies. The amount of money that your employer pays to the insurance company every month is truly income that you've earned, regardless of how the IRS chooses to view it. The simple act of changing health insurance from "benefit" status to an honestly stated payroll line-item would change a lot. How much does your employer pay per month for your coverage? Do you know? Some employers offer a small bonus if one forgoes this "benefit," but it is usually only a fraction of the actual amount they pay. For example, let's say you love your health insurance -- it's just fantastic -- and your paycheck (after tax and regulatory changes) shows that every month your employer buys it on your behalf for $563. If you could tell your employer that you'd just rather have the cash (note -- employers will not do this because remember, it's a "benefit", not income that you've earned) and could find a policy that was almost as good but cost $100 less per month, wouldn't you do it? I know that a lot of people would. That creates an immediate downward pressure on pricing, as well as better offerings from different providers who are hoping to hit different tiers of price/coverage tolerance.

So, if the vast majority of consumers are actually seeing and feeling the amount of money they pay for the coverage they receive, the structural problem of the felt-cost/perceived value disparity that generates run away prices is largely eliminated. But who pays for the new, really expensive stuff? Well, if we had an independent non-regulatory body that evaluated treatments for effectiveness, many insurance companies might begin to tier their products based on that body's recommendations. In other words, one insurer makes a plan that covers everything in the new NHEB's (National Healthcare Efficacy Board) A-rated treatment guide for $350/month for your family. That's their most basic level, for the most effective stuff. They also have a plan that covers everything in NHEB's A and B-rated treatment guides for $450. Want the stuff in the C-rated guide? $750. Want the crazy, just brand new stuff all the way down in the G-rated category? $1500. But the good thing is that you know up front what you're getting, and can compare the relative costs and benefits with open eyes. And the best thing is that there will be people, most likely plenty of people, who will be willing to pay all-out for that $1500/month plan, or who will just pay it out of pocket. Who are those people? Well, Paul Krugman and President Obama call them the wealthy, and I guess they might be. However, while they look down on these people for their wealth, to me they look like the venture capitalists of the health care industry.

As time goes on and newer treatments are developed, those treatments that started off in the D and E groups might become more succesful (and cheaper!) as more people use them and doctors become more familiar with them. Eventually, they slide up and become B and C-rated procedures. The stuff that really doesn't work that well or that often stays down on E, for example. Everyone wins.

It really appears that Krugman is forgoing any kind of economic rationality in this piece in favor of his political dogma. I've heard it said a number of times that Krugman is a brilliant economist but pretty terrible when it comes to political thought. Obviously, the one is bleeding into the other, and I don't think it's to his credit.

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