Stuck In (The Middle?) With You?

Well, Stealers Wheel’s lyrics often come to mind when surveying the political scene.  The first two lines of the chorus are often apropos but the we have never before felt like the last two lines apply to us.  In case you forgot:

Clowns to the left of me
Jokers to the right

Here I am
Stuck in the middle with you

What has got us in a tizzy is Kevin Drum at Mother Jones is reminding us that National Health Care Is Free.  It is silly but we have read it so you don’t have to.  What is worrisome is the jokers on the right.  Paul Mirengoff at PowerLine reports that:

At the recent National Conservatism Conference in Washington, the crowd voted overwhelmingly in favor of a resolution calling for the United States to adopt an “industrial policy.” In so doing, the conservative crowd agreed with Sen. Elizabeth Warren who, as John [Hinderaker at PowerLine] has noted, also wants the U.S. to adopt such a policy.

The idea is for the government, through a set of policies — taxes, spending subsidies, regulation, and tariffs — to protect factory jobs against the forces of globalization and technological change.

Paul links to James Pethokoukis at AEI for an evaluation.  The headline is “GOP’s Stupid Swoon For Big Government.”  We are entirely on board on “Stupid” but this was the National Conservatism Conference rather than just Marco Rubio.  As the link shows, serious people were there.

As we are trying to deal with the level of disagreement on the right, we come across this from Rosie Gray in Buzz Feed News:

It’s an odd feature of American politics today that while the Republican party as an institution has never been more unified, the right has never been more ideologically fluid. Intellectual subgroups have had their moments in the sun: neoconservatives, libertarians. But they, and the Reaganites who have decided conservative dogma since the 1980s, have all diminished as Donald Trump has occupied all of the available breathing room on the right.

We can help Rosie with her confusion.  The GOP is as fractious as ever.  Just like the Democrat party.  The right has always had intellectual subgroups.  Each candidate brings a number of those subgroups together.  The Donald created a new one: NeverTrump.

Oh, back to Kevin and our concerns on the left.  Kevin is trying to convince us that national health care is free and he says:

You see, the vast bulk of health care spending goes to providers. This means that the only way to reduce spending is to pay doctors less, pay nurses less, pay drug companies less, and pay device manufacturers less. This will not happen, and anyone who’s serious about national health care would be insane to try. Why put up an enormous barrier to success, after all? [Emphasis added]

We agree with Kevin on the part we have put in bold.  The only problem is that the part above it is a description of national health care.  It is certain

Sidebar: We often envy writers for their certainty about a variety of things.  The outcome of very few events is certain.  End Sidebar.

that national healthcare will pay doctors less, nurses less, drug companies less, and manufacturers less.  As a small example from the left, there is the Obamacare tax (#10) on medical devices.  The Donald, like many politicians, is upset with drug prices.

Then Kevin explains how it is free:

The one thing we probably could do is get rid of insurance companies, which would save a bit of money—probably about enough to make up for the cost of adding the remaining uninsured to the system. So in the end it comes out even after all.

We did not make that up.  Kevin is saying that moving administration largely from the insurance companies to the government is going to save us money.  Not just a few dollars but enough to add all of the uninsured into insured.  What do you think the probability that the government is more efficient that private enterprise?  To be fair, given the government regulations in health care, the chance is very close to but not exactly zero.

The clowns and jokers seem to be more numerous than ever.  Did MWG really end up in the middle?  How many adjectives or prefix will there need to be to make MWG a conservative? Are you with us?  We have received but not read the other Kevin’s new book.  Perhaps reading that we relieve our funk.  We hope to get around to explaining why George Will’s new book is great but we still feel lonely.

 

 

 

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Medical Pricing

Steve Cohen’s article on hip replacement prices in the WSJ struck a chord for several reasons.  We had a family member just get a new hip.  Transparent prices are critical to have effective markets.  Medical prices have always seemed very odd, especially for procedures that are pretty standard.

We often talk about expertise here and we plead guilty to lack of expertise on medical pricing.  Part of this post is to remind ourselves to find out more.

We want to discuss the oddity of medical prices.  In Steve’s article he says that he had both hips replaced and

[T]he hospital had charged $175,000 for my right hip and $180,000 for the left. The insurance company had paid discounted rates of $75,000 and $77,000.

The physicians and other professionals involved in these surgeries have amazing skills but the procedures are pretty standard with a variety of specialists making sure that the surgeon can be efficient.  We saw it in person for eye surgery and we were impressed by the capitalism at work in all the specialization.  Because of part of the specialization was to administer drugs we don’t remember all of the details but we were queued up like planes on a runway and rolled down to operating room for take-off.

The point is they need a full queue to maximize profits with all these specialists.  How does it benefit them to announce a price that is more than double the actual price?  We are sure that there is a reason for the difference but we don’t know what it is.  Our assumption is that essentially all of these procedures are covered, in large part, by insurance.  Perhaps it is a faulty assumption.  When we went in for our procedure we met with the financial person who looked at our insurance and said we don’t need to talk about prices other than this small blue bag you need to bring (we are not making this up).  It cost us a few bucks.  Perhaps the high list price is actually used but our priors are that there is a bureaucratic explanation.  We are open to suggestions and plan to look ourselves.

Healthcare And Incentives

Clark Harvighurst, professor emeritus at Duke, writing at the WSJ Editorial Page has an interesting article related to health-care and taxes.  He mostly addresses it to three CEOs, Bezos, Buffett, and Dimon who he summarizes with BB&D.  We love the ampersand too Clark.  We are 100% in agreement with his point that excluding health-care benefits provided by employers from employee income is major problem with the US health-care system.  We are not convinced, however, that folks react exactly how he describes.

To be clear, when an employee receives health-care benefits paid by the employer it is valuable to the employee but it is not part of gross income as determined by the Internal Revenue Code.  Specifically:

Under IRC sections 105 and 106, employer-provided health benefits, including reimbursement and insurance, are generally excluded from the income of employees.

It is one of those weird parts of the tax law that excluded almost $22,000 in income from MWG tax return a few years ago.  We agree that BB&D would provide a major service if they pushed to treat health-care income as taxable like other income.  We are not convinced that the beneficiaries are acting as Clark says.  Here is his quote:

Because employees don’t pay taxes on employer-paid insurance premiums, most workers assume that—and behave as if—their health-care costs are borne by employers. True, most employees now pay some share of premiums directly, along with copayments and deductibles. But they still unknowingly pay far more in lower take-home pay. When working Americans say they like their health plans, it’s clear they aren’t seeing the whole cost picture.

We don’t see it that way.  It seems to us workers act as if health-care costs are not taxable while wage income is.  Thus, getting a whole dollar of health-care insurance rather than a dollar of wages that are reduced by FICA and income taxes seems rational.  We think they are knowingly taking less take-home pay.  Folks buy way too much insurance (they cover everything they can) because it is cheaper with before-tax-dollars.

Sidebar: Another problem with the current system is that a few folks are worse off under this deal.  An example is the Lady de Gloves who did not take the health-care play offered by her employer because MWG was already covered.  She got nothing while most folks got thousands of dollars worth of insurance.  End Sidebar.

It is also rational for the employer since they pay a dollar in health care instead of a dollar plus FICA.  So we see the current system as a rational reaction to the current irrational tax system.  We do agree with Clark that the current system makes many of us uninterested in that actual costs of medical care.  We entirely agree with Clark that we hope BB&D can change the tax treatment of fringe benefits.  If we can fix corporate taxes then why not this?

Values, Healthcare, and Health

UPI reports on a research study by Matthew Davis from the University of Michigan.  Matthew finds that:

American seniors are getting healthier overall, but the well-educated, rich and white are seeing the greatest gains, a new study finds.

Matthew is amazed that rich and white folks are seeing the biggest gain despite Medicare for older Americans.  He thinks that the solution must come from government policies:

“Policies have to extend beyond just getting people access to healthcare to get at what’s driving disparities. The lack of improvement in health among all groups could imply that public health initiatives are leaving some people behind,” he added in a university news release.

Sidebar One: In the UPI report there are no Asians.  There are only whites, blacks, and Hispanics.  UPI does not link to Matthew’s study so we don’t know about the study and it might be that Asian are not of interest to UPI.  End Sidebar One.

Sidebar Two: Matthew is an assistant professor.  That means he is early in his academic career.  End Sidebar Two.

Matthew and UPI seem unaware that there is lots of discussion about culture and cultural values. Heather Mac Donald has a nice summary of the article by Amy Wax and Larry Alexander and the responses to it.  Of course, Amy and Larry have been called racists.  Here is part of what Heather said.

Today, the consequences of that cultural revolution are all around us: lagging education levels, the lowest male work-force participation rate since the Great Depression, opioid abuse, and high illegitimacy rates. Wax and Alexander catalogue the self-defeating behaviors that leave too many Americans idle, addicted, or in prison: “the single-parent, antisocial habits, prevalent among some working-class whites; the anti-‘acting white’ rap culture of inner-city blacks; the anti-assimilation ideas gaining ground among some Hispanic immigrants.”

Heather isn’t discussing health but some of the behaviors like opioid abuse and anti-social habits will directly have an impact on health while others might connect to health.  Charles Murray has been working in this area for years.  There are two issues: First. there lots of causes of health.  It could be (gasp) that there are genetic differences among races.  It could be that there behavioral causes.  Those behavioral causes might be cultural or they might be something else entirely.

Second, access to health care is not health care and neither of those is health outcomes.  It is possible but not likely that government policies are going to lead to equal health care outcomes for every group of people.

What is amazing to us but not Matthew is that there are lots of potential cultural causes but neither Matthew or UPI even considered them.  There is an astounding amount of discussion about Charles and Amy.  We need to consider adding two and two to get four.  Behavior has an impact on health.  Culture has an impact on behavior.  It seems highly probable that culture has an impact on health.

Markets Versus Business

Veronique De Rugy returns to one of her favorite topics on The Corner at NRO: The difference between being pro-business and pro-markets:

It is unfortunate that so many Republicans, conservatives lawmakers, and pundits conflate being pro-market with being pro-business. These are two separate things. Unfortunately, this confusion has produced thousands of government handouts and privileges to companies in the name of being pro-business — and these companies have developed a sense of entitlement. Worst of all, for many of them, government-granted privileges are an inherent part of their business models.

Our view is that the confusion on the right is limited.  Most of the decisions to abandon economic freedom by the right are made with full knowledge.  Folks see the political advantage in giving up economic freedom.  It is too bad, for example, that Marco Rubio supports sugar subsidies but we believe he understands what he is doing even if he does not admit it.

Where the real problems come is in the debates between left and right.  It is in that comparison that we need to make the distinction between pro-markets and pro-business.  The left is usually pro-business for a limited set of business but are never (can anyone think of a counter example?) pro-markets.  The right always starts out as pro-markets but sometimes some of them ends up as pro-business based on status quo arguments.

We need to understand that the left is anti-markets and the right is pro-markets.  The pro-business stuff comes from different directions too.  The left wants to determine economic winners.  The right, sadly, wants to pick political winners.  Pro-freedom except for sugar (we exaggerate slightly) makes you a senator.  We can’t be content about that but we need to accept that it is currently true.  Economic conservatives, as with the health care bill, need to decide if they can accept some small portion of a loaf as an improvement.  The health care bill will be one of many difficult choices for economic conservatives in the near future.

It Will Be A Binary Choice Chris

Senator Chris Coons (D, DE) is fighting to keep at least a single Obamacare insurer in his state.  He said this about the failing enactment:

“I’ve never said (Obamacare) was perfect,” Coons said. “I wasn’t a member of Congress when it was passed. It was passed by only one party [his], and it was passed with the expectation that the ACA would be amended, would be fixed, would be improved over time, as experience showed some of its limitations.”

It will soon come to a binary choice Chris.  He says he won’t work with the GOP but will party be more important than constituents?  The Democrats have been able to create amazing party loyalty recently.  It is a major reason why their numbers have dwindled in the Obama era.  Here is the Washington Post trying to put some lipstick on the deceased.