Krugman on Levitt on healthcare

Paul Krugman has a post criticizing some rather silly and superficial comments about healthcare made by Steve Levitt.  In a discussion with David Cameron, Levitt compared free healthcare to a market where cars were free.  Of course the healthcare market differs from the car market in some very important ways not captured by that analogy.  It’s not that the analogy is useless (it does help to explain why America spends so much on healthcare), rather the problem is that it is just the starting point of a discussion, not a useful way of summing up the problem.

So Krugman’s right about that, but this comment made me want to scream at the computer:

That’s us in the upper right-hand corner: our uniquely privatized system is uniquely expensive, while overall indicators of the quality of care don’t point to any US superiority. So on the face of it, the evidence strongly suggests that the proposition that health is an area where private markets work badly is borne out by experience.

Our “uniquely privatized system?”  A system where nearly half of healthcare expenditures are made by the government?  And much of the other half is made by insurance companies that are private in name only?  Recall that nearly 40% of the cost of “private” health insurance is covered by government subsidies.  And that government regulators determine what procedures must be covered.  And the government controls entry into the healthcare industry. This is called a “uniquely private system”?  Both America and Europe have socialized medicine, the Europeans are just better than us at avoiding massive waste in the system.  Both our so-called “private” insurance and our so-called “public” insurance systems are far more expensive than in Europe.

Krugman doesn’t mention that Levitt also opposes the US healthcare system (a pretty important oversight), as does any sensible person.  It’s a disaster.  The car analogy is useful in one respect.  If you make something “free” for the consumer, and don’t regulate spending effectively, you have huge excess spending.  So how come the European systems have “free” healthcare as well, without as much overspending?  It’s simple; they ration care.  We are going to have to do the same.

The real choice is not between the US system and the European systems, but between systems where people pay out of pocket (like Singapore) and systems where they don’t (the US and Europe.)  Of course Krugman won’t show you that sort of graph, as it would demonstrate exactly the opposite of what he claims.  Singapore spends much less on healthcare.  Indeed he didn’t even include Singapore in his graph—I wonder why?  (Yes, Singapore regulates health care costs, as do all countries.  But that’s not what Krugman’s chart was addressing.)

Krugman is pretty unreliable when talking about free market reforms.  Recall that (in 2007) he claimed that Argentina and Mexico had adopted Chile’s neoliberal reforms, without the good results.   I suspect he gets his information from reading Naomi Klein.

This also caught my attention:

There’s also the resurgence of faith-based free-market fundamentalism. I’ll write more on this soon, but I’m seeing on multiple fronts signs of an attempt to wave away everything that happened to the world these past seven years and go back to the notion that the market always knows best.

Attempts to wave away everything that has happened over the past seven years?  What does that remind me of?  Maybe this:

Here we go again. I laughed, I cried and I felt like it was 2006 all over again while reading the financial press this week cheerlead administration steps designed to “ease mortgage credit.”  What’s really happening is, in an incredible gift to banks and investors, Fannie Mae and Freddie Mac have now officially completed their horror-movie-like rise from the dead. Expect to see Housing Bubble 2 in neighborhood theaters near you very soon, with investors laughing all the way to the bank.

Mel Watt, the new director of the Federal Housing Finance Agency, gave his first public speech on Monday, and made clear that the notion of winding down Freddie and Fannie was dead. In fact, he called for increasing their role in greasing housing sales. Headline after headline expressed relief that it’ll be easier to get mortgages, and what a great thing that is for the economy.  The same lack of curiosity by financial journalists that helped create the housing mess — if banking regulators say it, it must be true! — has reared its ugly head again.

.  .  .

Lowered lending standards. Abandoning down payment requirements. Forgiveness for banks that originate underperforming loans. And most of all, pressure to prime a sluggish market and a sluggish economy using any means possible — and a green light from Washington, D.C. – these are all the elements that were place back in 2001 that led to the housing bubble.

Oddly I’m not seeing much outrage in the liberal blogosphere.  Perhaps because it’s the Democrats in Congress and the White House that are leading the charge for bringing back the “deregulated” housing regime that (in 2008) progressives assured us caused the financial crisis.


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47 Responses to “Krugman on Levitt on healthcare”

  1. Gravatar of ThomasH ThomasH
    17. May 2014 at 08:24

    I agree with much of the criticism but ultimately not quite. On the margin that was being debated in 2008 it was nothing, a modification of the “uniquely privatized” (scare quoted should have been in the original) system and something more like the European system. It was not a good choice set so we did not move far from our “uniquely privatized” spot.

  2. Gravatar of Elwailly Elwailly
    17. May 2014 at 08:51

    I don’t understand the point of the post. Is it that Krugman is wrong? About what? Is it that the comparison to Europe is meaningless because we have the same systems (they’re just better at it)? Or is it that Krugman doesn’t advocate your preferred solution (the Singapore model)?
    Shouldn’t the push for the Singapore model come from the right? Oops.. No. Not enough trust that the government can manage such a system here. So why even bring it up?

  3. Gravatar of Justin Justin
    17. May 2014 at 08:59

    The point of the post is

  4. Gravatar of Justin Justin
    17. May 2014 at 09:05

    Sorry, issue with my phone.

    The point of the post seems to be that Krugman aggressively attacks a straw man. Health care in the US isn’t anything like a free market approach – the closest thing to a free market in health care is Singapore which Krugman ignores in his critique of private health care.

  5. Gravatar of ssumner ssumner
    17. May 2014 at 09:13

    Thomas, Yes, our system is actually not all that different from Europe, except far less efficiently managed.

    Elwailly, As I’m sure you know, lots of people on “the right” like the Singapore system. So yes, that’s where the push is coming from. If you are talking about GOP Congressman, of course they’re mostly ignorant. As are the Dems. That’s a given.

    You said:

    “I don’t understand the point of the post. Is it that Krugman is wrong? About what?”

    Yes, I think I said pretty clearly that he was wrong in describing our system as “privatized” and implying that Levitt was defending it.

    Justin. That’s right.

  6. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    17. May 2014 at 09:24

    If there were a Nobel prize for non-sequiturs Krugman should win for this one. That America spends a higher portion of its GDP on ‘health care’, could be that health care is a superior good, to which the law of diminish returns doesn’t apply. For a start.

    Then let’s see, what would a competent economist predict for a system in which one party consumes a good or service, a second provides it, but a third party pays for it?

    How about when government designates WHO can call themselves a health care provider, and what they can provide?

  7. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    17. May 2014 at 09:30

    And where free markets are allowed to work (even in Canada);

    http://www.lasik.md/canadian.htm

    ——–quote——–
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    The Lasik MD Guide to LASIK in Canada can help you find a LASIK surgeon in Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland, Nova Soctia, Ontario, Prince Edward Island, Quebec and Saskatchewan.

    Our Canada surgeons offer LASIK price quotes, free information packets and even the ability to schedule a complimentary consultation directly from the Lasik MD web site.

    Simply click through to a location near you and we’ll show you the way from there.
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  8. Gravatar of JLK JLK
    17. May 2014 at 09:34

    What fraction of the financial crisis was:
    1) unwise borrowing
    2) unwise lending
    3) unwise derivatives trading that magnified 1) and 2) several fold
    4) unwise nominal GDP management by the Fed and other central banks

    My sense from this blog was 100% 4) or close to it. And the recent policy statements seem to only facilitate 1) and 2) (as well as some wise borrowing lending) at the margin.

  9. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    17. May 2014 at 09:37

    ‘Uniquely privatized system’;

    http://www.qualsight.com/lasik-financing

    ‘We currently have several LASIK financing programs available. The cost of LASIK financing (laser vision correction) can be as low as $54 a month per procedure with GE CareCredit approval.

    ‘QualSight has set contracted pricing with doctors across the USA so we save our members on average $1,500 off the average LASIK eye surgery cost. Our Care Managers explain the procedure types listed so you can understand the differences.’

  10. Gravatar of Elwailly Elwailly
    17. May 2014 at 09:38

    ssumner, “Yes, I think I said pretty clearly that he was wrong in describing our system as “privatized” and implying that Levitt was defending it.”

    Point taken.

    I suppose the issue is Krugman is calling “Privatized” the system of running money through private insurance and private providers as we do here whereas you’re definition of “privatized” is one where price has a strong role in allocating resources.

    I can’t argue with that since I agree with your view. Krugman’s assumption that Levitt is advocating a more US-like system is probably wrong.

  11. Gravatar of Philippe Philippe
    17. May 2014 at 10:30

    The US health system is nothing like the system in the UK or France, which I know a bit about.

  12. Gravatar of Philippe Philippe
    17. May 2014 at 10:50

    “The real choice is not between the US system and the European systems, but between systems where people pay out of pocket (like Singapore) and systems where they don’t (the US and Europe.)”

    Really?

    From the Singapore Ministry of Health website:

    “Singapore offers universal healthcare coverage to our citizens, with a financing system anchored on the twin philosophies of individual responsibility and affordable healthcare for all…

    
We have evolved a mixed financing system, with multiple tiers of protection to ensure that no Singaporean is denied access to basic healthcare because of affordability issues…

    The first tier of protection is provided by heavy Government subsidies of up to 80% of the total bill in acute public hospital wards, which all Singaporeans can access.

    The second tier of protection is provided by Medisave, a compulsory individual medical savings account scheme which allows practically all Singaporeans to pay for their share of medical treatment without financial difficulty…

    The third level of protection is provided by MediShield, a low cost catastrophic medical insurance scheme. This allows Singaporeans to effectively risk-pool the financial risks of major illnesses… Singaporeans must subscribe to the basic MediShield product before they can purchase the add-on private Integrated Shield Plans. This industry structure preserves the national risk pool and guards against ‘cherry picking’ of healthy lives by private insurers…

    Finally, Medifund is a medical endowment fund set up by the Government to act as the ultimate safety net for needy Singaporean patients who cannot afford to pay their medical bills despite heavy subsidies, Medisave and MediShield.

    Organisation of service delivery:

    
Singapore today has a mixed delivery model. The public sector dominates the acute care sector, delivering 80% of the care in this sector. The primary care sector is dominated by private sector providers, which account for about 80% of the market. In the step-down care sector (e.g. nursing homes, community hospitals and hospices), service provision is mainly provided by voluntary welfare organisations, most of which are funded by the Government for their services rendered to patients.”

    http://www.moh.gov.sg/content/moh_web/home/costs_and_financing.html

  13. Gravatar of Major_Freedom Major_Freedom
    17. May 2014 at 11:00

    Your entire critique of Krugman applies to you yourself, where you call your moderate statist worldview “libertarian”, where you call your socialist plan for money “market” monetarism. The list goes on and on.

  14. Gravatar of ssumner ssumner
    17. May 2014 at 11:29

    Patrick, I also recall reading that plastic surgery inflation is lower than for other types of operations–probably because insurance doesn’t cover it.

    JLK, I’d say:

    1. 15%
    2. 15%
    3. 5%
    4. 65%

    Elwailly, I think Krugman was doing what he accuses others of doing. Conservatives will say the eurozone recession proves the European welfare state is broke, and Krugman says no, it’s bad monetary policy (the euro).

    Philippe, Yes, in the system you describe the government spends about 1.2% of GDP on health care. In the US the government spends about 8% of GDP on healthcare. Which system do you think right wing American intellectuals favor, and why? The one where the government spends 1.2% of GDP, or the one where they spend 8% of GDP?

    And yes, I’ve experienced British and US healthcare. In both cases you pay little or nothing. But not in Singapore.

  15. Gravatar of Mark A. Sadowski Mark A. Sadowski
    17. May 2014 at 12:20

    Scott,
    Off Topic.

    Izabella Kaminska discusses the Japanification of the Euro Area:

    http://ftalphaville.ft.com/2014/05/16/1853562/charting-europes-japanification/

    May 16, 2014

    Charting Europe’s Japanification
    By Izabella Kaminska

    “…Meanwhile, there’s also an eye-opening comparison — which should be of interest to anti-austerity campaigners such as Paul Krugman — setting out real GDP in terms of investment, GDP and consumption data for the two countries:

    [Graphs]

    As the analysts note, a powerful fiscal stimulus in Japan helped to counter the demand shortfall. That caused personal consumption to continue to grow until 1997 and investment to rebound almost to its previous peak in just six years — something which isn’t slated for Europe any time soon…”

    This caught my eye because the charts, which come by way of Credit Suisse, fail to take into account the idiosyncrasies of the System of National Accounts (SNA), which both Japan and the Euro Area use. Under SNA, investment spending includes both private and government investment spending. The item labeled “government expenditures” in the graphs is actually just government consumption spending, and doesn’t include government investment spending.

    Why does this matter? Because in the 1990s the Japanese government engaged in a massive old school Keynesian fiscal stimulus, heavily tilted towards government investment spending (i.e. “infrastructure”). The Credit Suisse graphs totally miss that, and imply that the decline in Japanese private investment spending was much smaller than it actually was.

    In fact, David Andolfatto did a post on Japanese government spending, and after I alerted him to how SNA treats government investment he did a followup post:

    http://andolfatto.blogspot.com/2013/09/another-look-at-koizumi-boom.html

    In particular, I want to draw attention to the following graph:

    http://2.bp.blogspot.com/-ErmuYzOucSg/UkMQEopzdkI/AAAAAAAABAw/YoDnO-D7-YI/s1600/Japan2.png

    Japanese real government investment spending increased by over 50% in between 1992Q1 (the peak in RGDP before the recession) and 1996Q2. This was not a trivial amount because unlike in the US and the Euro Area, where government investment spending is only 3.4% and 2.1% of GDP respectively, Japanese government investment spending reached a staggering 9.9% of GDP in 1996Q2.

    Now, one can argue that things would have been much worse in the absence of this massive infrastructural spending, but as Kaminska goes on to note, Japan didn’t lose monetary policy traction until much later. In fact the BOJ’s call rate didn’t really hit the zero lower bound until March 1999.

    One other thing that I think is worth calling attention to is the fact that the failure to disaggregate Japanese investment spending leads to the failure to notice that private investment spending soared during the Koizumi Boom in the 2002-2008. This is because while private investment spending increased, public investment spending decreased, obscuring a boom in private investment within the aggregate investment statistic. Thus I encourage people to compare the Credit Suisse graph with David Andalfatto’s.

    And of course we all remember when Japan did its first ryōteki kin’yū kanwa (QE). That was from March 2001 through March 2006. Coincidence?

    Incidentally, in the case of the Euro Area, government consumption and investment spending is the only major component of GDP that is higher in real terms than it was in 2008Q1 (the peak in RGDP before the recession), over six years ago. In contrast, in the case of the US, the only major component of GDP that is lower than it was in in real terms in 2007Q4 (the peak in RGDP before the recession) is government consumption and investment spending.

    The difference is obviously attributable to the fact that the US has done QE, and that the Euro Area is only now considering its possibility.

  16. Gravatar of Mark A. Sadowski Mark A. Sadowski
    17. May 2014 at 14:07

    “Thus I encourage people to compare the Credit Suisse graph with David Andalfatto’s.”

    should be spelled

    “Thus I encourage people to compare the Credit Suisse graph with David Andolfatto’s.”

  17. Gravatar of Brett Brett
    17. May 2014 at 14:56

    The Singaporean numbers on public health care spending are probably too low – my guess is that they’re not including the “forced savings” aspect of Medisave. It’s an accounting difference.

  18. Gravatar of tesc tesc
    17. May 2014 at 15:01

    General question, anybody, I am desperate.

    Where do I get data about Nominal Income not NGDP? I know they are really close but I want to do some comparison. I cannot find the data anywhere.

    Thanks

  19. Gravatar of tesc tesc
    17. May 2014 at 15:06

    I think I found it at FRED as GDI, but it is a little different front NGDP. What would be the difference?

    http://research.stlouisfed.org/fred2/graph/?chart_type=line&recession_bars=on&log_scales=&bgcolor=%23e1e9f0&graph_bgcolor=%23ffffff&fo=verdana&ts=12&tts=12&txtcolor=%23444444&show_legend=yes&show_axis_titles=yes&drp=0&cosd=2002-09-08%2C2002-09-08&coed=2013-10-01%2C2013-10-01&width=670&height=445&stacking=&range=Custom&mode=fred&id=GDI%2CGDP&transformation=lin&nd=&ost=-99999&oet=99999&scale=left&line_color=%234572a7&line_style=solid&lw=2&mark_type=&mw=3&mma=0&fml=a&fgst=lin&fq=Quarterly&fam=avg&vintage_date=&revision_date=

  20. Gravatar of tesc tesc
    17. May 2014 at 15:06

    I think I found it at FRED as GDI, but it is a little different front NGDP. What would be the difference?

    http://research.stlouisfed.org/fred2/graph/?chart_type=line&recession_bars=on&log_scales=&bgcolor=%23e1e9f0&graph_bgcolor=%23ffffff&fo=verdana&ts=12&tts=12&txtcolor=%23444444&show_legend=yes&show_axis_titles=yes&drp=0&cosd=2002-09-08%2C2002-09-08&coed=2013-10-01%2C2013-10-01&width=670&height=445&stacking=&range=Custom&mode=fred&id=GDI%2CGDP&transformation=lin&nd=&ost=-99999&oet=99999&scale=left&line_color=%234572a7&line_style=solid&lw=2&mark_type=&mw=3&mma=0&fml=a&fgst=lin&fq=Quarterly&fam=avg&vintage_date=&revision_date=

  21. Gravatar of tesc tesc
    17. May 2014 at 15:10

    If GDI is what I think it is, would not be an even better nominal variable to target because the problem in the short run is sticky wages, so targeting GDI would go around the problem of sticky wages?

  22. Gravatar of dtoh dtoh
    17. May 2014 at 16:03

    PK conflates health with health care and with medical care. Until he admits the distinction, it’s hardly worth having the discussion.

  23. Gravatar of benjamin cole benjamin cole
    17. May 2014 at 16:08

    Interesting post. Healthcare flummoxes everybody. BTW, the federal government does run a huge communist healthcare system, absolutely immune to right-wing critics—the VA.

  24. Gravatar of Scott Freelander Scott Freelander
    17. May 2014 at 17:41

    Scott,

    I’d rather the government just get out of the mortgage market, and I’m liberal. Maybe minimum down payments and max monthly payments as a percentage of income make sense, but I buy hour argument that the drop in NGDP was the real problem in ’08 and ’09, so I guess this isn’t all that bad, if the Fed will just adopt a higher inflation target, or better yet, NGDP level targeting.

  25. Gravatar of FXKLM FXKLM
    17. May 2014 at 18:07

    There are a handful of sectors in the United States where costs are massively higher than other developed countries: infrastructure, education, military and healthcare. For whatever reason, we have a uniquely inefficient and costly public sector.

    It’s silly to assume that a government-run U.S. healthcare system would be as cheap as other developed countries when the costs of everything else the U.S. government does are nothing like other developed countries.

  26. Gravatar of Morgan Warstler Morgan Warstler
    17. May 2014 at 18:35

    Elective surgery rates FALL.

    No matter the listed price the best boob doctors work now under $5K, using new gummy bear implants $6K. Cash out the door thank you very much. that price has been stable for 10 years, it hasn’t grown with inflation.

    Laser Eye surgery is now $1500-2000.

    Laser hair removal has gotten so low, it basically is half the price of razors.

    Whenever anyone liberal mentions healthcare, the only answer needed, the only answer anyone should use is is Mitch Daniels and the Indiana Public Employee HSA system.

    Of course, high end treatments, in patent drugs should not be available at all to anyone getting a subsidy…

    But we still ought to have even the poorest, most subsidized on a HSA plan, put $2K a year in their acct and let them have half of whatever is in it when they turn 45, and then again at 55, and everything they turn 65.

    The internet is coming to fix healthcare, it won’t be long before a full diagnostic machine is in every home.

  27. Gravatar of dtoh dtoh
    17. May 2014 at 18:45

    “For whatever reason, we [the U.S.] have a uniquely inefficient and costly public sector.”

    Amen. When you can’t even get the escalator in Penn Station to work, it’s a pretty good indicator that you won’t be able to successfully build and operate an high speed train network.

  28. Gravatar of Ram Ram
    17. May 2014 at 18:46

    I would be interested in seeing a model that lays out all of its assumptions about how markets in medical care and medical care financing work, where the optimal policy is something like single payer. Then I’d like to see data that lends support to those assumptions. What we usually see instead are lists of market failure jargon and moral considerations heaped together with the single payer conclusion taken as obvious. I’m willing to believe that single payer is optimal, I just want to see the argument. Until then, it’s hard for me to take Krugman seriously when he complains that Levitt is in denial. Denial about what? Show me the model (and then show me the data).

  29. Gravatar of Ram Ram
    17. May 2014 at 19:02

    Another way of making the point is that the free marketers have a model. If we want to criticize it, we know how to do so, because we know what it assumes. But criticizing those assumptions doesn’t by itself tell us what the optimal policy is. We have to make alternative assumptions, and then solve for the optimal policy. Then we can argue about how well the data support the different models. I’m fine with informal argument, as I think this is often an efficient way of moving the debate forward. But now we’re at an impasse. We know exactly how to refute one version of the free market argument, but it is unclear how to refute the single payer argument because it isn’t entirely clear what that argument is.

  30. Gravatar of Morgan Warstler Morgan Warstler
    18. May 2014 at 03:34

    Ram,

    I can see a single payer system working thusly:

    1. It is a “public option” – we call it Soup Kitchen Care

    2. it has a global budget (like the VA) – but like $3K a man a year

    3. if you use it, as a patient, you cannot sue

    4. It is staffed by student doctors and student nurses, see #3

    5. It has only out of patent medicine. Xrays not MRIs. But, medical trials on new meds and equipment are all done there.

    6. It is the older hospitals and clinics all over US. Again see #4

    7. Using it you are means tested, up to $6k a year for people making above $100K.

    8. You are a #, you do not have choice of doctor or treatment. EVER. You become part of the patient borg, and global outcomes are the goal. The young are weighted over the old.

    This is how I refute the Single Payer system. It is a coufnterplan. One that fully leave intact and frees the free market system for those that can afford it. This ensure new tech and treatments continue to get driven, it might even speed them up, by turning Soup Kitchen Care into a non-stop testing environment.

    It removes the claim that there are those people today who cannot get care. it basically gives the uninsured Cuban care. Exactly the kind Michael Moore loves.

  31. Gravatar of benjamin cole benjamin cole
    18. May 2014 at 04:03

    Egads, I nearly agree with Morgan. A zero frills, no-sue universal plan, plus aggressive opiates and euthanasia for those terminally ill and aged.
    Cigarette and alcohol and legalized drug taxes help pay for it. All medical records kept on cloud, no billing is done at all, so vastly simplified. Doctors can refuse service to hypochondriacs.

  32. Gravatar of dtoh dtoh
    18. May 2014 at 04:07

    Morgan,
    You have precisely described the Japanese single payer system. Except that everyone has to use it unless they want to fly to Houston or Bangkok.

  33. Gravatar of ssumner ssumner
    18. May 2014 at 05:02

    Mark, Great comment.

    Brett, First of all, I would not include forced saving as government spending. And second, overall healthcare costs in Singapore are about 4% of GDP, far below the GOVERNMENT levels in the US.

    tesc, Yes, it might be better to target GDI. But the two variables are identical in theory, any differences are due to measurement error. If errors are unforcastable, then target expecting GDP growth is the same as targeting expected GDI growth.

    Scott, I also favor laissez-faire. But that means no deposit insurance. If we have FDIC, we minimize the damage by refusing to insure deposits loaned out for subprime mortgages. And since deposit insurance is mandatory for banks, that means only non-banks can do subprime.

    FXKLM, Good point.

    Morgan, Yes, I like you idea for Michael Moore/CubaCare in a single payer system, for those who want it. I would have wanted it when I was young.

    Ram, Good points.

  34. Gravatar of Morgan Warstler Morgan Warstler
    18. May 2014 at 05:46

    Guys,

    Best thing you can do today! Quick listen to Balaji Srinivasan and Larry Summers on Piketty:

    https://soundcloud.com/a16z/the-two-big-problems-with-thomas-pikettys-capital-in-the-twenty-first-century

    He’s banging on my invisible RGDP gong right in front of Summers.

    Listen to Summers response on Consumption Inequality….

    THINK ABOUT the Health Issue.

    Ram,

    This is why I advocate Soup Kitchen Care. It is a hack, to throw Summer’s argument out the window.

    Because, deep down, Larry doesn’t really care about Health. Larry is SMART, and he knows there’s an end run being made around his powerbase by Balaji.

    If it isn’t health, it will be something else.

  35. Gravatar of tesc tesc
    18. May 2014 at 12:45

    “then target expecting GDP growth is the same as targeting expected GDI growth.”

    Great answer Doc

    Thanks

    I have another question but I will post it in the latest post.

  36. Gravatar of Mike Sax Mike Sax
    18. May 2014 at 18:52

    “Krugman doesn’t mention that Levitt also opposes the US healthcare system (a pretty important oversight), as does any sensible person.”

    Ok but that’s pretty generic. What exactly does he ‘oppose’ about it-that we have Romney-Obamacare? I’m guessing he probably opposes Medicare. As if we had some great system prior to 1966.

    I see that even a conservative like Cameron wasn’t too impressed with Leavitt-in fact according to him, Cameron threw him out.

    If you admit that Europe does it better than us why not do it more like Europe? Even by your admission we seem to do it the worst. I just don’t think the reason for this is Medicare and Medicaid.

  37. Gravatar of Morgan Warstler Morgan Warstler
    19. May 2014 at 04:09

    Marc Andreessen:

    http://www.econtalk.org/archives/2014/05/marc_andreessen.html

  38. Gravatar of ssumner ssumner
    19. May 2014 at 05:20

    Morgan, Check out my new post at Econlog.

    Mike, Another headscratcher. I support reducing our healthcare expenditures from the 18% of GDP we spend closer to the 10% of GDP Europe spends. I support universal healthcare. Why do you assume otherwise?

    And I said Levitt’s comment was silly and superficial, so I don’t understand your comment about Cameron. What point are you trying to make? As always, it is not at all clear.

  39. Gravatar of Morgan Warstler Morgan Warstler
    19. May 2014 at 05:23

    1. Software eats world
    2. Digital Deflation – brand new world
    3. Tyler Cowen owes conservatives an apology
    4. Consumer welfare – invisible RGDP
    5. Entrepreneurism is up
    6. Bitcoin is the new Internet – distributed trust
    7. Titled property via the blockchain
    8. Reporters used to work for monopolies
    9. Edu and Healthcare

    Economists really have no excuse to not be listening closely to this narrative.

  40. Gravatar of Morgan Warstler Morgan Warstler
    19. May 2014 at 05:41

    Scott, since I’m blocked at Econlog :)

    Healthcare technology, like everything else, makes thousands of marginal luxury-price improvements, and only slowly do the winning technologies disperse.

    Right now we have it getting even harder to improve a chemical medicine, bc the placebo response is improving:

    http://ajp.psychiatryonline.org/article.aspx?articleID=1764112

    And when you are dying, you don’t want to hear you can’t try crazy stuff.

    So there is R&D pressure coming that would LIKE a Cuban + wacky new stuff model.

    MRIs today can now be had for $600:

    https://www.smartchoicemri.com/

    So smart better technology does filter down.

    Eventually we are going to get to a Soup Kitchen Care model, because, subsidizing BMWs pisses off people who cannot afford the BWM, and get no subsidy.

    The underlying issue is that the drug help and mental stuff are things the poor suffer thru. This would suggest we’ll see greater deregulation in this areas to reduce the cost of Obamacare plans for all the norms who don’t need it.

    As Obamacare takes full effect, we’ll see these twin pressures burst out.

  41. Gravatar of Mike Sax Mike Sax
    19. May 2014 at 19:38

    Scott I don’t know why you find a pretty straightforward comment so puzzling. I can never understand whether you honestly try to understand when I leave a comment or not-if you do I don’t get what’s so hard to understand-I find that most people I confer with, at least know what my point is whether they agree or not-that includes a few economists I’ve spoken to over time. So I don’t think I’m particularly obscure.

    Ok you say you support universal healthcare, however, the devil is in the details. I don’t think you get there through 100% privatization.

    You say Singapore has some magic formula that gives them UC with 100% privatization well then don’t be coy explain how they get there. If you mentioned it in some post you wrote awhile back I obviously don’t have that memorized so if you care about giving me clarity you could give a brief idea of what it’s about. All you gave us here is that Singapore allegedly is totally private and universal. If that’s true how do they get here and is that applicable to us-again I don’t know you’re the one who said it so I’m asking you. On the other hand you admit that Europe does HC better than we do and they go with fully nationalized care so clearly that can work in healthcare.

    As for Cameron I would think it’s pretty clear what I’m getting at. Leavitt told Cameron he should get rid of the British NIH and Cameron then threw him out. In that Cameron would seem to disagree with both you and Leavitt-as while you criticized Leavitt’s car analogy you still agree with him that the answer is 100% privatization. Or am I wrong that’s what you favor? Again, asking not telling.

  42. Gravatar of Morgan Warstler Morgan Warstler
    20. May 2014 at 01:59

    Mike,

    Ugh dude.

    Levitt being breeezy and NHK costing less – not interesting. That’s it.

    Krugman acting like we have “free market” in healthcare – makes him a liar. If you are asserting we have one, you are also a liar. You know it isn’t the case. You know it. You don’t get to act like a little kid and say “really?!?” Not while you also assert you’ve been talking to people who think you are keeping up.

    How clear does this have to be for you to admit it lands a direct hit:

    In elective procedures where we DO have a free market, prices actually FALL and new technology is adopted faster.

    It is possible to even split the US into two types of care:

    1. one built just like Cuba (or UK) – single payer – with only the cheapest most cost effective treatments, and less expensive doctors (ones who get paid less), where there is a global budget, and all patients are treated as numbers, and there is rationing to hold down costs.

    This is very simple to do. All the shitty hospitals, and clinics in the bottom half of the zip codes in each MSA are nationalized, and staffed by govt. doctors – it is RUN BY THE VA (note this IS the VA), and we assign say $4K per man, for the 100M people who will be in it. Thats $400B spent on the bottom 1/3 of America. To give you a comparison, the VA runs on $5,500 per man – and deals with a higher % of hard core injuries.

    2. one that is actually, FINALLY, a free market that runs like elective and cosmetic surgery does in the US. Where the USG doesn’t insist what is covered, doesn’t pay for ANY of it, doesn’t decide what states can do, allows you to sign contracts agreeing to limit what you can win in a legal suit, allows reputation, shopping, and insurance to work, all of it.

    This splits the difference. Since everybody is covered and has AT LEAST as good of care as Cuba, some people who have the $$$, but don’t place a high value of marginal medical improvements, will CHOOSE #1 – it’s not like the new dick pills are that much better than Viagra, you get that right?

    And the engine of rapid medical innovation in the US that drives advancements for the rest for he world will actually move faster and cleaner than it currently does.

    Look man, you are being just a breezy as Levitt. Why do you expect better treatment from Scott than Cameron.

    But the one simple fact is, you know that #2 will be better than #1. The folks who can afford better, just like in UK and Canada and everywhere, else will use #2. And somewhere DEEP DOWN, it hasn’t really hit you that UK and France and all the places you point to and say “that’s great” – well those are a two tier system – haves and have nots.

    The difference is in the US, we have MORE haves. And that’s a good thing, man. That’s what all those countries are trying to do right now, is figure out how to have even more people suddenly be able to afford to choose.

    Stop lying.

    Start with, “yes the US doesn’t have any close to a free market in Healthcare at all….”

    Then say whatever you have to say.

    You can do it Saxie.

  43. Gravatar of TallDave TallDave
    20. May 2014 at 08:16

    Krugman doesn’t mention that Levitt also opposes the US healthcare system (a pretty important oversight), as does any sensible person. It’s a disaster.

    For healthy people, yes. If you’re sick, especially with something difficult/expensive to treat, then the US healthcare system is where you want to be because it delivers more and higher-quality care than any system in the world. It may be much less cost-effective, but if you want really cost-effective health care you could do nothing but immmunizations and antibiotics and get around 90% of the benefit to life expectancy. MRI, neurosurgery, orthopedic surgery, organ transplants, new drug development… toss all that out and you have a really cost-effective system. Or do about half of what we do, and you have OECD median care.

  44. Gravatar of ssumner ssumner
    20. May 2014 at 10:37

    Mike, You said;

    “You say Singapore has some magic formula that gives them UC with 100% privatization”

    Umm, no I don’t say that. I said it’s a part socialized system.

    TallDave, The problem is that there is very little evidence that all that fancy stuff does any good. In some cases yes, but in other cases it does harm. The net effect . . . ????

  45. Gravatar of George George
    25. May 2014 at 01:57

    Extremly stupid post and easily debatable out of nothing:

    Economics must look in to efficiency.
    Efficiency must be made on a cost basis analisis.
    In the analisis of spendig pro capita of the analized statistics are taken in to account social and private costs of both systems (mutualistic and highly privatized).

    Cost in a higly privatized (what its called liberal but its a form liberism to be honest since you are all professors) health care systems in one of the most developed countries in the world its 3 time pro capita then the average of comparable mutualistic systems.

    Other than that its a sterile debate for the sake of arguing.

    The fact that over the decades more of the health care weight has been given to the government its because privatized healthcare system its not efficient. In you affermation there is the proof that your point is wrong.

    Extremly stupid post. It wouldnt stand a chance on an accademic level or simply scinetific analisys (and economics are a semi science branch of knowledge).

  46. Gravatar of TallDave TallDave
    27. May 2014 at 11:31

    TallDave, The problem is that there is very little evidence that all that fancy stuff does any good.

    No, that’s not quite accurate Scott. With some exceptions, that fancy stuff generally does do good, but it’s almost always more cost-effective to do less. Note this is especially true for palliative care and anything for the elderly. But if you’re old, or in pain, or both…

    Now certainly the United States could start doing half as many MRIs and the effect on overall LE would be small. But good luck getting Americans to accept inferior care, even at the margins — no public system is going to survive that kind of deeply unpopular rationing. As a society we’ve decided this is what we want to spend money on.

    If the death lists at the VA have proved anything, they’ve proved that. Those kinds of delays are par for the course in the rest of the OECD.

  47. Gravatar of ssumner ssumner
    27. May 2014 at 16:44

    TallDave, Robin Hanson suggests that the expensive stuff does more harm than good. I find his arguments more persuasive than the opposing side.

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