Medical costs

A few posts ago I suggested that if the U.S. spent the same percentage of its GDP on health care that Sweden does, we’d save enough each year to wipe out the deficit, give or take a few billions. However, with the cesspool we call ‘Congress,’ that’s not likely to happen any time soon. Instead, our elected officials, those we choose to represent our interests, are instead doing the bidding of the health care industry, which is already huge and growing fatter by the day.

As it happens, Steve Brill conducted an expose of medical costs for Time magazine. It’s worth a read, especially if you like to get angry and spit all over yourself. Will it make a difference?

It wasn’t too long ago that Michael Moore gave us Sicko, a documentary on our stupid and monumentally expensive health care industry. He focused on those Americans who have medical insurance to dramatize the insanity, beginning with a man who was stitching up his own leg to save money, because his insurance company had either capped or declined coverage. One scene that also jumped out: a patient arriving at a UK hospital’s cashier window upon being discharged. The patient was not there to pay a bill but to collect money for the taxi-ride home. Of  course, Sicko did not change America’s sick health insurance industry, though it may have helped effect the passage of Obamacare, a hodge-podge of legislation that will leave the medical corporations richer and richer.

Brill presents some real-life horror stories of individuals experiencing random ailments, from a slip-and-fall in the backyard to a “routine” outpatient procedure to fix an chronic backache. We are introduced to hospitals’ “chargemaster,” a price list for any and all items used in patient care. As you might guess, the chargemaster prices are many times higher than the hospitals’ costs, what they actually pay for pills, gauze, gowns, etc. Those items add up. So much so, that the final bill can quickly explode past a patient’s insurance caps, putting the individual or his or her family in financial jeopardy.

As you might also guess, the health care industry in the U.S. is hugely lucrative, with “not-for-profit” hospital administrators pulling down seven-figure salaries and hospitals themselves realizing record profit margins. Here’s Brill:

The result is a uniquely American gold rush for those who provide everything from wonder drugs to canes to high-tech implants to CT scans to hospital bill-coding and collection services. In hundreds of small and midsize cities across the country — from Stamford, Conn., to Marlton, N.J., to Oklahoma City — the American health care market has transformed tax-exempt “nonprofit” hospitals into the towns’ most profitable businesses and largest employers, often presided over by the regions’ most richly compensated executives. And in our largest cities, the system offers lavish paychecks even to midlevel hospital managers, like the 14 administrators at New York City’s Memorial Sloan-Kettering Cancer Center who are paid over $500,000 a year, including six who make over $1 million.

Taken as a whole, these powerful institutions and the bills they churn out dominate the nation’s economy and put demands on taxpayers to a degree unequaled anywhere else on earth. In the U.S., people spend almost 20% of the gross domestic product on health care, compared with about half that in most developed countries. Yet in every measurable way, the results our health care system produces are no better and often worse than the outcomes in those countries.

It doesn’t have to be this way. Brill, who may have not been so disposed prior to his investigation, suggests a Medicare-for-all program, since Medicare does so much better at controlling costs than does the private sector, which never heard of the word ‘efficiency.’ Yet, Medicare could do better.

For example, the lobby-infested Senate and House voted to prevent Medicare administrators from negotiating with drug companies. Congress also protects Big Pharma profits through the elaborate and almost completely unnecessary patent regime, which virtually guarantees that Americans pay orders of magnitude more for prescription drugs than our counterparts in Europe, Canada, and Japan.

This is all very serious stuff. Unless Congress itself gets serious about lowering health care costs, we’ll be paying so much for medical procedures and medicine that bankruptcy will become all too common.

Have we finally killed a zombie?

Washington state’s flim-flam artist, Tim Eyman, who makes his living pushing initiatives, received a message today from the supreme court in Olympia. The two-thirds requirement for new taxes, which voters have routinely passed, cannot bind the legislature. If the people want a super-majority, they’ll have to get it via a constitutional amendment.

The same supreme court held that the legislature is grossly underfunding education. Fix the problem or else. But Eyman’s initiative hamstrung Olympia; it could not establish new taxes by a simple majority vote. And it’s highly doubtful that the state could fulfill its constitutional mandate without new revenues. Today’s ruling removes the impediment.

But not the politics, unfortunately. A small group of rogue Democrats in the senate switched sides, putting the Republicans in control of that body; the house remains solidly Democratic.

Moreover, I expect Eyman to launch yet another campaign, this time to amend the constitution. After all, there’s money in it—for him.

The sequestration cannot help

The Bureau of Economic Analysis released figures from the last quarter of 2012. Not to put too fine a point on it, but the economy registered a big blah. Here are the numbers since the first quarter of 2009:

GDP 2009 to last quarter 2012Tomorrow marks the trigger for the “sequester.” (Leave it to Congress and the media to convert a verb into a noun.) The Obama administration brought attention to the “odious” measure, itself adopted when a “Grand Bargain” failed. The White House released data on spending cuts and their impacts to all 50 states. Evidently the information did not spur enough citizens to write menacing letters to their respective representatives, since Washington, D.C., appears to have adopted a ho-hum attitude.

On the good news front, the Pentagon’s budget will take a substantial hit. Also, Medicare and Social Security are safe for now. And while the cuts will not spell instant ruination, the accumulating reductions will surely take their toll over time.

Meanwhile, back to the economy. If you believe that inadequate demand stifles economic growth, then the sequestration will stifle some more.

Under current conditions government spending has not crowded out private investment. Indeed, the private sector has an excess of cash that’s not doing anyone any good. Better that it be put to productive use. But if people aren’t buying, why build?

As I’ve mentioned on several occasions, John Maynard Keynes opined that economies can fall into a state of depressed equilibrium, marked by disinvestment and high unemployment. Without government action, the situation can persist indefinitely, thought Keynes.

The economy seems to be in such a rut, as the latest figures demonstrate. If the federal government withdraws more money, then demand will decline even further.

Republicans like this stuff because they believe in economic exsanguination: the patient will recover only after losing more blood. This is one more reason members of the party call themselves “stupid.”

 

Economic exsanguination

Who would have thought that reducing government spending would impede economic growth? Certainly not the Republicans, or at least the brand that sows horror and mayhem in today’s Congress. For them, the most urgent problem we face is the damn deficit; get that down and, voila, all is well with the world. Yet, as it happens, cutting federal expenditures during recessionary periods actually makes it more difficult to achieve fiscal balance.

It’s as if we were in the time of screwball “physicians” who believed that the solution to any ailment was to drain blood from the sick patient. If a little blood letting wasn’t doing the trick, by all means siphon off some more. Let’s call it ‘economic exsanguination.’

Writing for the Washington Post Brad Plumer quotes Ben Bernanke in congressional testimony:

The CBO estimates that deficit-reduction policies in current law will slow the pace of real GDP growth by about 1-1/2 percentage points this year, relative to what it would have been otherwise.

A significant portion of this effect is related to the automatic spending sequestration that is scheduled to begin on March 1, which, according to the CBO’s estimates, will contribute about 0.6 percentage point to the fiscal drag on economic growth this year. Given the still-moderate underlying pace of economic growth, this additional near-term burden on the recovery is significant.

Moreover, besides having adverse effects on jobs and incomes, a slower recovery would lead to less actual deficit reduction in the short run for any given set of fiscal actions [Plumer’s emphasis].

Plumer goes on to explain:

The logic here is simple enough. The sequestration cuts will drag down economic growth this year, which will mean that fewer Americans will have jobs and less tax revenue will pour in. Nothing cures deficits like stronger economic growth. And right now, Congress’s policies are standing in the way of stronger growth.

Sounds plausible, right? If you agree, you’re not a Republican.

What’s not to like?

I often forget that there are some progressives in Congress, and they’re not just sitting on their hands. They have plans and initiatives, though it remains to be seen if they have successful strategies to implement their goals and objectives. One plan in particular is “The People’s Budget.” You can view it here.

If you hate federal deficits and debts, you’ll love this: the budget proposes to not only eliminate the debt but to create a surplus over the next 10 years.

If you believe that education is important, then you’ll love this: the People’s Budget proposes to increase funding at all levels.

If you think we’ve wasted a few trillion dollars on senseless wars, then you’ll love this: the budget proposes to bring the troops home and cut billions from Defense.

If you thought Obamacare was incomplete, then you’ll love this: the People’s Budget proposes to establish a public option; also, it would prevent reductions in Medicare payments to physicians over the next decade.

If you’ve always believed that full funding for Social Security and Medicare can be easily accomplished, then you’ll love this: the budget proposes to subject all wages to the payroll tax.

If you’ve wanted a new New Deal, then you’ll love this: the People’s Budget would invest billions in public infrastructure, clean energy, and the information superhighway.

In summary, the People’s Budget includes the following:

  • Deficit reduction of $5.6 trillion
  • Spending cuts of $1.7 trillion
  • Revenue increase of $3.9 trillion
  • Public investment $1.7 trillion

So, what whackos have endorsed or spoken favorably of the People’s Budget?

  • Bill Clinton
  • Paul Krugman
  • Dean Baker
  • The Economist (magazine)
  • Rolling Stone (magazine)
  • Robert Reich
  • The Washington Post
  • The Guardian

 

You can add my name to the list. How about you?

“Odious” sequester

For The New Yorker Ryan Lizza writes:

The looming sequester, which would slash spending across the government, was created by both parties, after the failure of the Grand Bargain, in 2011, as a purposely odious policy, in order to force the two sides to reach a more rational plan to reduce long-term deficits.

Whoops. Evidently not odious enough, as the sequester is set to kick in at the end of the week. Lizza reports that many House Republicans, who are to the right of everyone, now embrace the “purposely odious policy.”

The White House released a report on projected impacts to the individual states. Here they are for Washington. As Olympia struggles to achieve a court-ordered boost in education spending, the sequester, according to the White House, will cut over $11 million in education funding to Washington state.

Teachers and Schools: Washington will lose approximately $11,606,000 in funding for primary and secondary education, putting around 160 teacher and aide jobs at risk. In addition about 11,000 fewer students would be served and approximately 50 fewer schools would receive funding.