Friday, July 31, 2009

Are We The Problem? Or Is It Jon Stewart?

Let me start off by saying that I like Jon Stewart and I think the Daily Show is very funny. In fact, I've been to a taping of The Daily Show and I laughed my ass off.

But there is still something that bugs me . . .

I know many people disagree with this, but I find the fact that Jon Stewart is now one of the most trusted news anchors in America very troubling. The Daily Show is not a legitimate news source, and Jon Stewart is not a journalist.

Stewart insists that his show is merely satire -- intended to mock the political elite -- but, over the years, it's become much more than that. Younger audiences have increasingly turned to the Daily Show for political commentary, and mainstream media organizations have lauded Stewart for his journalistic skill.

All of this would be fine if The Daily Show was slowly accepting higher standards of journalistic integrity as it earned more of the public's trust. But no one expects this. Instead, we expect hard-hitting stories that we can trust, without any journalistic accountability to justify that trust. We want to have our cake and eat it, too. And The Daily Show is more than happy to let us think we can.

There is a real irony here. Anyone who's listened to Jon Stewart talk knows that this is precisely the line of attack that he uses against the mainstream media. Cable news stations especially have abandoned actual reporting in favor of infotainment. But this kind of news doesn't actually inform its audience; it simply gets us riled up. It doesn't allow us to examine the facts on our own; it force-feeds us the news from a certain perspective.

During his scathing interview with Jim Cramer, Stewart conceded, "You know, look, we're both snake-oil salesmen to a certain extent. But we do label the show as snake oil here. Isn't there a problem selling snake oil as vitamin tonic?"

There certainly is. But if Stewart identifies himself as a snake-oil salesman, why do so many people seem to think he's selling vitamin tonic?

Wednesday, July 29, 2009

Doctors, Salaries, and Productivity

My undergraduate economics textbook has some interesting things to say about the salaries of health care professionals:

Conventional wisdom has been that physicians groups, for example, the American Medical Association, have purposely kept admissions to medical schools, and therefore the supply of doctors, artificially low. But that is too simplistic. A rapidly rising cost of medical education seems to be the main cause of the relatively slow growth of doctor supply. Medical training requires 4 years of college, 4 years of medical school, an internship, and perhaps 3 or 4 years of training in a medical specialty. The opportunity cost of this education has increased, because the salaries of similarly capable people have soared in other professions. The direct expenses have also increased, largely due to increasingly sophisticated levels of medical care and therefore medical training.

High and rising education and training costs have necessitated high and rising doctors' fees to ensure an adequate return on this sort of investment in human capital. Physicians' incomes are indeed high, averaging about $220,000 in 2004, but so too are the costs of obtaining the skills necessary to become a physician. Data show that while doctors have high rates of return on their educational expenses, those returns are below the returns for lawyers and holders of masters of business administration.

Is the rise in rise in doctors' salaries is due to rent-seeking behavior, as some suggest, or are there other economic factors at play?

There is also the issue of slow productivity growth in the health care industry:
Productivity growth in an industry tends to reduce costs and increase supply. In the health care industry, such productivity growth has been modest. One reason is that health care is a service, and it is generally more difficult to increase productivity for services than for goods. It is relatively easy to increase productivity in manufacturing by mechanizing the production process. With more and better machinery, the same number of workers can produce greater output. But services often are a different matter. It is not easy, for example, to mechanize haircuts, child care, and pizza delivery. How do you significantly increase the productivity of physicians, nurses, and home care providers?

Also, competition for patients among providers of health care has not been sufficiently brisk to force them to look for ways to reduce cost by increasing productivity. When buying most goods, customers typically shop around for the lowest price. This shopping requires that sellers keep their prices low and look to productivity increases to maintain or expand their profits. But patients rarely shop for the lowest prices when seeking medical care. In fact, a patient may feel uncomfortable about being operated on by a physician who charges the lowest price. Moreover, if insurance pays for surgery, there is no reason to consider price at all. The point is that unusual features of the market for health care limit competitive pricing and thus reduce incentives to achieve cost saving via advances in productivity.

Tuesday, July 28, 2009

Where It All Went Wrong

I really didn't want to write another post about the Gates arrest. The issue has been blown entirely out of proportion, and the criticisms leveled against the president by conservative pundits have gotten to be very unfair.

But I think it's worth listening to Juan William's explanation of where Obama went wrong. It's also worth reading Eugene Robinson's article criticizing Sergeant Crowley's actions.

Amidst all the hubbub, there is one rather trivial point that has been bugging me. I keep hearing various media pundits suggesting that black and Hispanic drivers are more likely than white drivers to be stopped by police. As far as I know, that's not true. Minority drivers are more likely than white drivers to be searched by policy during traffic stops, but no more likely to be stopped.

This certainly shouldn't diminish the fundamental grievance, but I think it's important from a policy perspective to know the precise nature of the problem, isn't it?

Monday, July 27, 2009

False Lessons, Universal Truths

I think this is a really savvy point (via Andrew Sullivan):

Ever notice how the criminal justice incidents that seem to capture the national attention are those that are either amenable to drawing false lessons (Gates was wrong about Crowley profiling him, therefore all claims of racial profiling are bogus; the Jena 6 were inaccurately touted as saintly victims, therefore there is no racial injustice in Louisiana), result in outcomes that almost never happen (false charges against Duke lacrosse players resulted not only in a public pronouncement of their innocence, but actual criminal charges against the power-tripping prosecutor), or otherwise give completely inaccurate assessments of how the criminal justice system actually works (like O.J., violent crime suspects are able to win acquittal via slippery defense lawyers, high-paid and hackish forensic experts, and racially sympathetic

Not sure why or how it works out that way, but it certainly seems to. Unfortunately, the public’s education about the criminal justice system seems to come chiefly through these high-profile cases.

There are always problems when we draw broad conclusions based on specific examples.

I think the reverse is also true. We need to acknowledge social context -- especially because that context often influences our behavior. But we shouldn't let that context bias our reading of particular events. There are execptions to every rule.

It's important not to mistake general truth for universal truth.

Krugman Goes After the Blue Dogs on Health Care

Paul Krugman's latest op-ed in the NYT seems like a blatant attempt to shame Blue Dog Democrats into supporting the House tri-committee majority group's draft legislation on health care reform.

The Blue Dog's main objections seem pretty sensible to me. On the public option, the Coalition explains:

In order to establish a level playing field, providers must be fairly reimbursed at negotiated rates and their participation must be voluntary. A “Medicare-like” public option would negatively impact hospitals, doctors and patients. Medicare reimbursement is, on average, 20 to 30 percent lower than private plans and patients. Using Medicare’s below-market rates would seriously weaken the financial stability of our local hospitals and doctors.

The Congressional Budget Office's analysis of the new draft legislation suggests that the public option would offer rates that are, on average, about 10 percent lower than private insurers. The analysis also indicates that about one-third of those receiving subsidized health insurance will obtain coverage through the public plan.

However, the CBO notes that its estimate is "subject to an unusually high degree of uncertainty." (Here are some of the reasons why.)

The gap between political rhetoric and objective reality seems to be growing larger every day. The president says that the public plan would have no advantages over the private options. Krugman says that the public plan would inject "competition" into the health care system.

But if the public plan is allowed to set rates significantly below the market at the outset, it will likely garner a disproportionately large percentage of individuals who are forced to purchase insurance through an individual mandate, and whose care is subsidized by the government. This will enable the public plan to keep rates low for a number of reasons -- most of which have nothing to do with fair competition.

Whatever form it takes, a public option will inevitably have advantages over private plans. Greg Mankiw addressed this issue a while back:

In practice, however, if a public option is available, it will probably enjoy taxpayer subsidies. Indeed, even if the initial legislation rejected them, such subsidies would be hard to avoid in the long run. Fannie Mae and Freddie Mac, the mortgage giants created by federal law, were once private companies. Yet many investors believed — correctly, as it turned out — that the federal government would stand behind Fannie’s and Freddie’s debts, and this perception gave these companies access to cheap credit. Similarly, a public health insurance plan would enjoy the presumption of a government backstop.

Such explicit or implicit subsidies would prevent a public plan from providing honest competition for private suppliers of health insurance. Instead, the public plan would likely undercut private firms and get an undue share of the market.

I think this is a point that defenders of the public option need to honestly engage with . . . rather than just attacking their intellectual adversaries' position as "incoherent."

Sunday, July 26, 2009

How Does New Jersey Define 'Disorderly Conduct'?

New Jersey's definition of "disorderly conduct" seems unnecessarily vague:

§ 2C:33-2. Disorderly conduct

a. Improper behavior. A person is guilty of a petty disorderly persons offense, if with purpose to cause public inconvenience, annoyance or alarm, or recklessly creating a risk thereof he

(1) Engages in fighting or threatening, or in violent or tumultuous behavior; or

(2) Creates a hazardous or physically dangerous condition by any act which serves no legitimate purpose of the actor.

b. Offensive language. A person is guilty of a petty disorderly persons offense if, in a public place, and with purpose to offend the sensibilities of a hearer or in reckless disregard of the probability of so doing, he addresses unreasonably loud and offensively coarse or abusive language, given the circumstances of the person present and the setting of the utterance, to any peson present.

"Public" means affecting or likely to affect persons in a place to which the public or a substantial group has access; among the places included are highways, transport facilities, schools, prisons, apartment houses, places of business or amusement, or any neighborhood.

Saturday, July 25, 2009

Right-Wing Extremism, Left-Wing Extremism

I've been meaning to comment on this for a few days now:

It's one of the silliest arguments I've ever heard. And, unfortunately, some mainstream media pundits have picked up on it. Various fact-check sites have debunked the claims against President Obama's citizenship. But these kinds of conspiracy theories rarely succumb to facts.

I still find it interesting how easily we fall prey to conspiracy theories. And I really wish we could have a longer discussion about the psychology of extremism, without all the partisan rhetoric over which political party is more likely to cater to its lunatic fringe.

Thursday, July 23, 2009

Friendship, Politics and the Law

A reader-contributor to Andrew Sullivan offers the legal perspective on the arrest of Henry Louis Gates Jr. at his home in Cambridge, Massachusetts.

So here, the questions are: What did Gates actually say? If he was addressing the officer, where those statements intended to provoke the officer to react violently? Could the statements have provokes another bystander to violence?

Of course, the decision as to whether or not a particular incident such as this amounts to a crime happens later, in court. At the scene, practically speaking, the officer has the discretion to arrest and charge disorderly conduct as he sees fit. That charge may or may not hold up in court, and often it doesn’t. Realistically the officer would probably not face any backlash (unless the accused happens to be a prominent Harvard professor.)

Regardless of your take on this incident -- and I believe that the arresting officer, James Crowley, was probably in the wrong -- I think it's fair to say that the president of the United States should not be weighing in on a matter that involves his own friend. The president admirably acknowledge his own bias, but he really should've stayed out of it publicly -- even if he was asked about it directly.

More importantly, has anyone else noticed that this is pretty much the premise of the film Amos & Andrew?

Update: The Gates police report (via The Smoking Gun).

Earlier, a friend suggested to me that the president's comment was not a "big deal." I don't exactly disagree with that -- the amount of media coverage this comment has generated is absurd. But I also take Connor Friedersdorf's point:

Isn't it notable that six months into his presidency, the most prominent advocacy President Obama has done on behalf of minorities mistreated by police is to stand up for his Ivy League buddy? Somehow I imagine that Professor Gates would've fared just fine absent help from Harvard's most prominent alumnus.

Whereas if President Obama spoke up at a press conference on behalf of people wrongly imprisoned due to "testimony" by police dogs, or advocated for those sexually assaulted by an officer, or spoke against prosecutors who block access to DNA testing, or called out the officer who choked a paramedic, or objected to the practice of police killing family pets, or asked the Innocence Project for a clear cut case of injustice to publicize . . .

I think, most importantly, the president's comments were politically imprudent.

President Obama tends to come across as a uniquely fair-minded person -- a characteristic that will likely help him achieve many of his policy objectives -- but trivial incidents like this could easily undermine that public impression. Why even cultivate the illusion of a conflict of interest?

I agree here with Tyler Cowen:

Most of all, engaging with the incident has been one of the few major tactical mistakes of the Obama Presidency. Presidents (and many others) make big mistakes when they "respond" to people with much lower status than themselves, in this case the policeman and his ilk. The net effect is to lower the status of the Presidency and this will prove especially important when Obama is trying to pass a controversial health care plan. Today he looks less "post-racial" than he did a week ago and although it was only one slip it won't be easy to reverse that.

Update II: President Obama backs off of his comments:

This has been ratcheting up, and I obviously helped to contribute ratcheting it up. I want to make clear that in my choice of words, I think I unfortunately gave an impression that I was maligning the Cambridge Police Department and Sgt. Crowley specifically. And I could've calibrated those words differently.

Wednesday, July 22, 2009

Profits and the Health Care Industry

There has been a lot of talk lately about the morality of profit-seeking behavior in the health care industry. Many advocates for a single-payer system have argued that it is fundamentally unethical for doctors and insurance companies to profit off of illness, while so many cannot afford to pay for care.

During the Democratic primary, presidential hopeful John Edwards basically endorsed this argument -- though he ultimately opposed a single-payer system.

Edwards explained:

I looked hard at single-payer. Proponents of single-payer have some very strong arguments, particularly the elimination of profit motive in a health care system. Medicare, for example, runs at 3 to 4 percent overhead compared to some insurance companies charging 30 to 40 percent profit and overhead, so I thought that there was a legitimate and strong argument for it.

This is a fair ethical consideration, regardless of its policy implications. Is it moral for individuals and businesses to profit off of illness? It seems to me that this question should be vigorously debated.

But many advocates for single-payer go further, arguing that removing the profit motive from health care will ultimately reduce costs. This is the logic behind the public option -- that, ceteris paribus, not-for-profit insurance companies will offer lower rates than for-profit insurance companies.

Is this sound economic theory?

Some advocate for single-payer, like Paul Krugman, have argued that a market-based approach to health insurance is economically irrational "because private markets for health insurance suffer from a severe case of the economic problem known as 'adverse selection,' in which bad risks drive out good." This argument -- while controversial -- is economically sensible.

Krugman was careful to note:

I'm not an opponent of markets. On the contrary, I've spent a lot of my career defending their virtues. But the fact is that the free market doesn't work for health insurance, and never did. All we ever had was a patchwork, semiprivate system supported by large government subsidies.

Krugman believes that the only way to correct the problem of adverse selection is to create a single-payer system. Unfortunately, this is not the argument employed by most advocates for single-payer. Many who support a larger role for government argue that profit-seeking behavior is the primary cost driver in the health care industry.

The Obama administration, for example, has insisted that a public plan will "force waste out of the system," making the health insurance market more efficient. The clear implication is that for-profit companies are more wasteful, and that this waste drives up health care costs.

Does this argument make economic sense?

The real question in terms of economic theory is not whether certain companies are motivated by profit, but whether the market structure allows those companies to become "price makers." A single-payer system would create a new kind of market structure in the health care industry -- a government monopsony, with the power to dictate prices.

But this is not the case with the public option. Unless the public plan is given some advantage over private plans, it will not have the market power to dictate prices -- even if its motives are more altruistic.

This is the reason so many opponents of government-sponsored health care fear that the public option is a backdoor to single-payer. The argument that a public option without any financial advantages can reduce costs does not rest on sound economic principles.

Monday, July 20, 2009

What's the Goal of Affirmative Action?

Ross Douthat has an interesting op-ed in today's New York Times on the future of affirmative action:

As this generation rises, race-based discrimination needs to go. The explicit scale-tipping in college admissions should give way to class-based affirmative action; the de facto racial preferences required of employers by anti-discrimination law should disappear.

. . .

Affirmative action has always been understandable, but never ideal. It congratulates its practitioners on their virtue, condescends to its beneficiaries, and corrodes the racial attitudes of its victims.

All of this could be defended as a temporary experiment. But if affirmative action persists far into the American future, that experiment will have failed -- and we will all have been corrupted by it.

Ross's point reminds me very much of Jamie Kirchick's take on the gay rights movement:

There is still important work to be done nationwide, and none of this is to downplay the daily efforts put forth by gay organizations in socially conservative parts of the country. But if the ultimate goal of the movement is to achieve equality for homosexuals, then those leading it should appropriately acknowledge progress along the way. That means accepting victory when it's achieved, rather than trumping up opposition at every opportunity.

Andrew Sullivan put it best: "The goal of the gay rights movement should be to cease to exist." In my view, this should also be the goal of affirmative action programs . . . .

Sunday, July 19, 2009

Easy Solutions to Health Care Costs Too Easy?

The Kaiser Family Foundation has an excellent primer on health care costs [pdf].

I think this is most important point:

Some approaches for dealing with health care costs may reduce the level of spending but not the rate of growth. Many of the policies under discussion in health policy circles to address costs -- such as increasing the use of electronic medical records and other information technology, promoting evidence-based medicine, provider payment reform such as pay-for-performance, changing the tax treatment of health benefits, consumer-directed health care, disease prevention and chronic disease management, or eliminating fraud and waste –- are aimed at improving the efficiency with which care is delivered. Successfully implementing these policies, which is not an easy task, would likely reduce the amount that we pay on average for care, but they are not likely to be longer-run solutions for addressing the rate of cost growth.

For example, medical errors and other quality lapses very likely increase the amount that we pay for health care, but to influence long-term cost growth, the prevalence or severity of errors and poor quality would need to be an increasing share of expenditures each year, which is probably not likely. Policies that reduce medical errors may well reduce the amount that we pay for care (and are important even if they do not).

But assuming that errors can be reduced to more optimal levels, costs would likely continue to grow, albeit from a lower level, at previously observed rates. Other interventions intended to make the health system more efficient, such as reducing the disparities in health care practices across regions and providers or increasing the use of electronic medical records, are likely to have similar effects. These are important initiatives that could make the health care system cheaper (compared to what we would spend without them) and better. By themselves, however, these types of initiatives are unlikely to address the long-term pattern that we have observed of health care’s growth as a share of economy.

As congressional leaders knit together a health care reform bill, many of the solutions that the Obama administration is proposing are unlikely to have any lasting impact on the long-term growth in health care spending.

If we're going to expand coverage to all Americans, I think we need to consider real, long-term cost control options. But we need to acknowledge that this could mean rationing care.

Thursday, July 16, 2009

The Christian God

Alister McGrath -- one of the best Christian apologists I've ever heard -- recently debated Christopher Hitchens at Georgetown University. If you have some time to spare and you're interested in religious philosophy, it's definitely worth watching.

I am no longer a practicing Catholic, but I've always had a big problem with the kind of militant atheism offered up by prominent "antitheists" like Christopher Hitchens and Richard Dawkins. These men consistently distort the Christianity that I grew up with, presenting the most horrific passages from the Old Testament as an integral part of Christian dogma.

I suspect Hitchens and Dawkins know that they are setting up a straw man here, since any theologian would tell you that serious Christians do not follow the law of the Pentateuch.

In his book The Dawkins Delusion?, McGrath offers an excellent explanation of how Christians tend to reflect on the Old Testament:

So how are we to make sense of the Hebrew Scriptures . . . ?

Christians base their approach on the teaching of Jesus, who saw himself as having come to fulfill, not abolish, the Jewish law (Matthew 5:17). Dawkins takes the view that Jesus regarded the Old Testament as wrong, requiring correction; Jesus, however, saw himself as fulfilling the Old Testament, and thus transforming it.

The Hebrew Scriptures are read and interpreted through a Christological filter or prism. It is for this reason that Christians do not -- and never have -- implemented the cultic law set out in the pages of the Old Testament.

True to form, Dawkins ignores this inconvenience, insisting that to take the Bible seriously is to "strictly observe the Sabbath and think it just and proper to execute anyone who chose not to." Or to "execute disobedient children." Dawkins knows this is not true; enough Christians have told him so.

Tuesday, July 14, 2009

The Supreme Court and Obama's Monopoly

Like many political junkies, I've been watching the confirmation hearing of Judge Sonia Sotomayor for the past two days. One remark by Senator Orrin Hatch really piqued my interest:

"In fact, Sen. Obama never voted to confirm a Supreme Court justice," Hatch said. "He even voted against the man who administered the oath of presidential office, Chief Justice John Roberts, another distinguished and well-qualified nominee."

I decided to investigate some of Obama's statements during the confirmation hearings of John Roberts and Samuel Alito, and I found one comment that I think is particularly unfair -- especially coming from a constitutional law professor.

In a floor statement during the confirmation hearing of Justice Samuel Alito, then-Senator Obama said:

And when I examine the philosophy, ideology, and record of Samuel Alito, I am deeply troubled.

. . .

[Judge Alito has] overturned a jury verdict that found a company liable for being a monopoly when it had over 90% of the market share at the time.

It's not just his decisions in these individual cases that give me pause -- it's that decisions like these are the rule for Samuel Alito, not the exception.

I'm sure that President Obama is aware that market share is not the sole criterion upon which firms are evaluated with regard to the Sherman Antitrust Act. In fact, the Supreme Court has repeatedly ruled that monopoly power does not automatically imply a violation of the Act.

From Wikipedia:

Section 2 of the [Sherman Antitrust Act] forbade monopoly. In Section 2 cases, the court has, again on its own initiative, drawn a distinction between coercive and innocent monopoly. The act is not meant to punish businesses that come to dominate their market passively or on their own merit, only those that intentionally dominate the market through misconduct, which generally consists of conspiratorial conduct of the kind forbidden by Section 1 of the Sherman Act, or Section 3 of the Clayton Act.

Why would President Obama cite this as an example of Judge Alito's 'troubling' record, without offering the necessary context for the decision?

Update: A list of Supreme Court precedents on the subject of monopoly power.

Sunday, July 12, 2009

Ginsburg Speaks

My friend who blogs at Art at the Auction recently linked to this interview with Justice Ruth Bader Ginsburg.

The interview is definitely worth a read, but I was very disappointed with Ginsburg's explanation of Ricci v DeStefano:

Q: Can I bring up the Ricci case, brought by the New Haven firefighters?

JUSTICE GINSBURG: This case had some very hard elements. It was a bit like the Heller case, which involved the Second Amendment. [Last year, the Supreme Court found that Washington gun-control laws that barred handguns in private homes were unconstitutional.] For that, the plaintiff was a nice guy who was a security guard at the Federal Judicial Center, and he had to carry a gun on his job, but he couldn’t carry it home. And in Ricci, you have a dyslexic firefighter. Which is just exactly what you should do as a lawyer. I mean, that’s what I did.

Q: It’s true, it’s a very good strategy. He was a very sympathetic plaintiff. And it was important that the city had already given the test that the white firefighters scored high on and the black firefighters did not.

JUSTICE GINSBURG: Yes. And the city weights the written and oral parts of the test 60-40, and says: That’s what the union wanted, it’s been in the bargaining contracts for 20 years.

I don’t know how many cases there were, Title VII civil rights cases, where unions were responsible. The very first week that I was at Columbia, Jan Goodman, a lawyer in New York, called me and said, Do you know that Columbia has given layoff notices to 25 maids and not a single janitor? Columbia’s defense was the union contract, which was set up so that every maid would have to go before the newly hired janitor would get a layoff notice.

In an earlier post, I criticized Ginsburg's dissent in this case. But Ginsburg again misses the central problem with her argument. As I've explained:

The question is whether the City vacated the results solely on the basis of disparate impact, without a legitimate belief that the test was flawed. Since they refused a technical evaluation of the test -- and in fact argued in district court that evidence of test validity is irrelevant -- it’s pretty clear that at the time they vacated the results, city officials did not have a legitimate belief that the test was flawed. They vacated the results simply because they got the wrong racial outcome. If city officials had looked at the imbalanced racial outcome, and then commissioned a technical review of the exam which found the test to be flawed, they would have been on more solid footing.

The City did, of course, have a collective bargaining agreement with the New Haven firefighter's union that specified a 60-40 weighting for promotional exams. This weighting may have been arbitrary. Ginsburg can even argue that it was unfair.

But this is not the reason the results of the exam were vacated.

Wednesday, July 8, 2009

NPR's Terrible, Horrible, No-Good, Very Bad Story

I listen to NPR almost every day, and like my friend Petpluto, I'm a huge fan of their Planet Money blog. But every once in a while, NPR produces a story that is so insanely one-sided it give me goose bumps.

That was definitely the case with their latest attempt to explain the public option. The story sounded like it came directly from the mouth of the Obama administration's press secretary. There were so many controversial ideas presented without any qualification, I was shocked when the commentary ended so abruptly. How could NPR not see the blatant bias in its presentation?

Fortunately, I'm not the only one who felt this way. NPR's own Alicia Shepard recently acknowledged that the story was poorly executed, and promised that NPR will try to do better next time.

I have to applaud NPR for its accountability and its journalistic integrity. It's very refreshing.

The Debate Over Administrative Costs Continues

Ezra Klein has another excellent post unpacking the issue of Medicare administrative costs. He argues that administrative cost comparisons are far more difficult than they may seem, and the entire debate is a bit of a distraction anyway.

The bottom line:

[N]o matter how good you got at slashing administrative costs, they will never be a panacea to the problems of the system. Rick Kronick, a political scientist at the University of California at San Diego, has done some of the best work on administrative costs, and he summed the situation up quite well. "The main question," he said, "is why are health care costs going up at 2.4 percent a year faster than GDP? And most of the answers to that question have nothing to do with administrative costs . . . ."

A friend also directed me to this article discussing health care costs and treatment options. Definitely worth a read.

Monday, July 6, 2009

Even More on Medicare Administrative Costs

Paul Krugman responds to Robert Book's recent article on Medicare administrative costs. Robert Book offers his reply in the comments section.

I agree with Paul Krugman on one point -- The Heritage Foundation is an advocacy group, so their numbers should always be met with some skepticism. This is true of any partisan think tank.

It's also true of partisan op-ed columnists for the New York Times.

Update: Greg Mankiw argues that the issue of administrative costs is really a red herring:

Low administrative costs are not to be confused with high administrative efficiency. In other words, administrators are not necessarily a deadweight loss to the system.

Medicare is consistently cited by the GAO as a program that is at "high risk" for fraud. In fact, Medicare administrators have repeatedly pleaded with Congress to increase funding for anti-fraud measures, which would ultimately raise Medicare's administrative costs:

Congress keeps a tight cap on Medicare's administrative overhead, leaving the perennial ''high-risk'' entitlement program with an infinitesimal fraction of its current $456 billion budget to combat fraud.

Indeed, Congress has a history of running Medicare -- whose healthcare programs are funded by U.S. taxpayers -- on the cheap. That policy has contributed in part to a generation of scammers bilking billions out of Medicare, which critics describe as a flawed honor system that's more intent on paying claims quickly than on verifying them first.

Update II: Megan McArdle weighs in on the Medicare debate . . . and on the larger debate over national health care.

More on Medicare Administrative Costs

Robert A. Book, a Senior Research Fellow at The Heritage Foundation, argues that Medicare’s per-person administrative costs are, in fact, higher than those of the average private insurer (via Greg Mankiw):

Medicare beneficiaries are by definition elderly, disabled, or patients with end-stage renal disease. Private insurance beneficiaries may include a small percentage of people in those categories, but they consist primarily of people are who under age 65 and not disabled.

Naturally, Medicare beneficiaries need, on average, more health care services than those who are privately insured. Yet the bulk of administrative costs are incurred on a fixed program-level or a per-beneficiary basis. Expressing administrative costs as a percentage of total costs makes Medicare's administrative costs appear lower not because Medicare is necessarily more efficient but merely because its administrative costs are spread over a larger base of actual health care costs. When administrative costs are compared on a per-person basis, the picture changes. In 2005, Medicare's administrative costs were $509 per primary beneficiary, compared to private-sector administrative costs of $453.

I don’t know all the methodological details of Book's analysis (and I'm skeptical of any study produced by Heritage), but his essential point should extend well beyond the health care debate. The question of how to compare unique data sets is often very complicated, even in the absence of politics. Basic considerations -- like whether to measure in terms of absolute numbers or proportions -- are often controversial. We should be particularly wary of unqualified statistical comparisons presented in the context of an emotionally charged policy debate.

They’re often very misleading.

Sunday, July 5, 2009

How Embarrassing . . .

I really wish I'd never written this:

Whatever Palin's shortcomings, stupidity is certainly not among them. She wouldn't have been chosen if McCain didn't believe she could stand up against Joe Biden in a debate.

I have a good feeling she'll surprise everyone . . .

Oh, how wrong I was.

But apparently I'm not the only one who regrets giving Palin the benefit of the doubt, particularly after her embarrassingly awful resignation speech:

I liked Sarah Palin and supported her inclusion on the GOP ticket last fall. I thought she had more toughness than this. It’s a big disappointment, and it’s the end of any hope of Palin getting taken seriously as a politician on the national level in the future.

Saturday, July 4, 2009

What's Happening in Honduras?

I really don't know anything about Central America, but I recently came across this excellent article in TIME Magazine explaining the roots of the Honduran conflict.

It seems that the ousting of the left-wing president Manuel Zelaya is really the culmination of a decades-old class struggle in Honduras, which has divided the country into two distinct political factions. Zelaya's largely socialist reforms have sparked intense hostility among wealthy business owners and other entrenched powers:
The mustachioed, sombrero-wearing Zelaya makes for an unlikely leftist hero. A 56-year-old former rancher and timber merchant, he took office in 2006 after campaigning on a centrist platform. But once in power, he drew close to Venezuelan President Hugo Chávez and quickly copied his formula for popularity: giving handouts to the poor and blaming all the country's problems on the rich. Amid rising crime and a spluttering economy, the establishment turned on Zelaya. The flashpoint came in June, when he called for a nonbinding referendum on changing the constitution to allow Presidents to stand for a second term. The Supreme Court ruled the vote illegal and soldiers whisked Zelaya away before it could take place, leaving Congressman Roberto Micheletti to be sworn in as the new President.

The Organization of American States has threatened to suspend Honduras' membership unless Zelaya is quickly restored to power, and the United States finds itself in the unusual position of supporting a leader who has aligned himself with Hugo Chávez and other left-leaning regimes.

Some conservatives have criticized President Obama for his stance, arguing that the removal of Zelaya was both legal and beneficial to the United States. But the Obama administration has, in fact, been slower than most European states to recall its ambassador from Tegucigalpa, perhaps aware that the threat of violence looms large if Zelaya decides to return to the country and attempt to retake power.

The situation in Honduras will likely provide an interesting test of Obama's foreign policy realism, with which I tend to sympathize. At the very least, we should all hope that this conflict ends not with a bang, but a whimper . . .

Friday, July 3, 2009

The Latest Health Care Reform Bill

In a letter to Senator Kennedy, the CBO offered its initial assessment of the new draft legislation on health care reform. The bill would add just under $600 billion to the national debt over ten years, and would likely cover about 2/5 of the uninsured.

The revised draft that came out of the HELP committee includes an employer mandate, which "would virtually eliminate the migration of employees from their employer-based insurance to public insurance, thereby reducing the financial burden on the government." This equates to a dramatic $400 billion reduction in the net cost to the federal government.

In addition, employees would no longer receive a federal subsidy to purchase coverage through the insurance "gateways" if their employer is already offering insurance -- even if that employer-provided coverage has been deemed "unaffordable."

Regarding the public option, the CBO estimates no "substantial effect on the cost or enrollment projections, largely because the public plan would pay providers of health care at rates comparable to privately negotiated rates -- and thus was not projected to have premiums lower than those charged by private insurance plans in the exchanges."

Greg Mankiw sees this latter point as a vindication of his earlier position on the public option. Meanwhile, Ezra Klein offers pragmatic support for the employer mandate . . . well, sort of.

The problem with employer-provided insurance, as many economists have pointed out, is that it distorts price signals and encourages consumers to "buy" more health care. When you're not paying for something directly, you tend use more of it. But employees really are paying for their employer-provided coverage -- the cost is generally passed on to workers through lower wages.

If it's true that employer-provided coverage encourages overuse of health care and deflates wages, will an employer mandate really help to reduce health care costs in the long-run?

Wednesday, July 1, 2009

Eating Our Way to More Expensive Health Care?

An interesting article on the growing levels of obesity among baby boomers and the likely effect on Medicare expenditures.

Obesity rates among adults rose in 23 states over the past year and didn't decline anywhere, says a new report from the Trust for America's Health and the Robert Wood Johnson Foundation. And while the nation has long been bracing for a surge in Medicare as the boomers start turning 65, the new report makes clear that fat, not just age, will fuel much of those bills.


Health economists once made the harsh financial calculation that the obese would save money by dying sooner, notes Jeff Levi, executive director of the Trust, a nonprofit public health group. But more recent research instead suggests they live nearly as long but are much sicker for longer, requiring such costly interventions as knee replacements and diabetes care and dialysis.

Studies show Medicare spends anywhere from $1,400 to $6,000 more annually on health care for an obese senior than for the non-obese.