Friday, January 29, 2016

fixer-upper economics

It's the car of your dreams since you were in high school, a 1960 Cadillac Eldorado convertible.  The previous owner put a lot of money into restoration, and the only thing that it needs to get back on the road is a new generator.  Piece of cake.  You track down the replacement generator on ebay, spend a weekend in your garage getting it installed, and you're behind the wheel on the way to the Seven-Eleven to pick up a celebratory six-pack.

A couple blocks down the road you notice that the steering pulls to the left, there's quite a lot of black smoke coming out of the tail pipes, and the transmission is making an odd grinding sound every time you shift gears.  You are wondering if you are going to actually make it all the way to the corner store, much less all the way across town to your job on Monday morning.  What to do?

Go read Dean Baker's analysis of the U.S. health care system.  I think you'll agree that the analogy is apt, and the solution is clear.

A couple excerpts to steer you in the right direction:

... Getting universal Medicare would require overcoming opposition not only from insurers and drug companies, but doctors and hospital administrators, both of whom are paid at levels two to three times higher than their counterparts in other wealthy countries. There would also be opposition from a massive web of health-related industries, including everything from manufacturers of medical equipment and diagnostic tools to pharmacy benefit managers who survive by intermediating between insurers and drug companies.

... in the case of prescription drugs, economists seem content to ignore the patent monopolies granted to the industry, which allow it to charge prices that are often ten or even a hundred times the free market price. (The hepatitis C drug Sovaldi has a list price in the United States of $84,000. High quality generic versions are available in India for a few hundred dollars per treatment.) In this case, we are effectively looking at a tariff that is not the 10-20 percent that we might see in trade policy, but rather 1,000 percent or even 10,000 percent.
And then he says:
In this context, Bernie Sanders’ push for universal Medicare can play an important role in energizing the public and keeping the pressure on.
Baker also asserts that "Krugman is largely right" in backing Hillary Clinton's incremental approach to fixing what ails the health care system, but he offers no explanation of that seeming contradiction to the evidence he has presented.

The article's analysis of a broken down system is still excellent in spite of that one inexplicable contradiction.  Perhaps Baker will sort out the issues better in subsequent installments.  In the meantime, it stll looks to me like the only practical way out of the dilemma is to dump that old Cadillac.


Jim Grey said...

I agree that our healthcare system is fubar, and I think that the ACA didn't actually make it any better and may have in some ways compounded the system's problems. I agree in principle that we need to move to a single-payer system. However, having worked as a key player on a contract to build customer-service software for Medicare, and having spent a fair amount of time at the headquarters of the Centers for Medicare and Medicaid Services in Baltimore working with leaders and staffers there on the project, the idea of universal Medicare scares me to death. I found CMS to be an enormously politicized organization that mostly pays lip service to its mission of serving beneficiaries. Sincere lip service, but lip service nevertheless, as CMS's primary missions appear to me to be to not do anything to upset members of Congress and to create thick layers of authority so that any approval can be delayed indefinitely. That's a cynical take, I know, but it's the reality I lived all four years I was on that project.

You might be interested in the article I wrote on my software blog about the experience of building that software for CMS.

Mike said...

Many thanks for that link. It was kind of slow to load, but came up eventually and was a very good read. Seems like it should be required reading for anyone looking at writing software for government use.

Regarding the ACA, a couple of obvious successes are getting insurance for millions of people who were previously uninsured, and the elimination of the insurance company filter of people with preexisting conditions. The flip side is that a lot of claims that the ACA would result in driving up health care costs and destroy jobs have been shown to be bogus.

That said, there is obviously a whole lot that remains undone by the ACA in terms of delivering affordable, quality health care. I certainly agree that the task would be fiendishly difficult. However, I think it is still possible, largely because virtually every developed country other than the U.S. is doing a pretty good job with health care, and a lot of them like the Scandinavian countries are running systems similar to what Sanders is proposing. To say that Americans can't have better health care that is more affordable because we have a dysfunctional political system seems to me to be just circular reasoning which explains nothing and goes nowhere.

A lot of Sanders' opponents raise the specter of imminent destruction of the ACA in the event of a Sanders presidency and an immersion of the country in an unwinnable fight to get to Medicare for all. That's all just a staw man argument. Sanders in his years in the Senate has shown a lot of political acumen and clearly knows when and how to pick a fight. My expectation is that he would take on the big problems one at a time, perhaps starting with big pharma patents and lobbying. It is also important to recognize that Sanders is not claiming that he can do anything significant without a big surge in interest and support from voters at all levels from municipalities on up. Clinton, by contrast, seems to be saying she will wave her magic policy wand and gradually erase all the problems. Color me skeptical.