Sunday, January 17, 2010

Off the Table or Under the Table: Economics vs. Health Care

Apparently, the Obama folks are following the Bush precedent, paying Johathan Gruber, a health care economist, under the table -- at least he seems to have done nothing to let it be known -- to influence the health care debate

I posted two brief mentions about Jonathan Gruber and health care, without realizing that he had a $392,600 contract with Health and Human Services that had not yet been made public.

First, last November, I posted the following comment in response to a New York Times article about Health Care, alluding to single payer being "off the table.":

Jonathan Gruber is a health economist from MIT -- an expert, no doubt. David Leonhardt quotes his favorable comment on the Senate health care bill: “I can’t think of a thing to try that they didn’t try.”

Leonhardt, apparently, never bothered to ask him about single payer, which was off the table.

A year before, prior to the contract, I posted:

I’m just looking over the August NBER digest. It covers five NBER articles, of which three may be mildly interesting. The first has the scary title, Public Insurance Expansions Crowd Out Private Health Insurance by Jonathan Gruber and Kosali Simon. We learn that: For every 100 children who are enrolled in public insurance, 60 children lose private insurance.” Thank God that George Bush had the courage to stand up to the radicals and threatened to veto an expansion of child health coverage. Otherwise, they might lose their private insurance.

Jane Hamsher has a piece showing how effectively the White House and the Democrats use Gruber's expertise to support their own mangling of health care reform.

Glenn Greenwald has a piece, the second part of which compares this arrangement to what Bush did with Armstrong Williams and Maggie Gallagher and the CNN generals.


TheTrucker said...

OK, fine.... So the common people and the unions are right as rain and the economics profession certifies what they are paid to certify. So who didn't know that?

So what do we do? Not about the economics "profession" being the worlds oldest profession, but about the current state of health care reform? If the Democrats simply chuck the bill they will have wasted 6 months that would have better been used on tax reform and the economy. And they can't get any more out of the 60 vote Senate than what they have managed to get. As matters stand they will be totally decimated in the forthcoming elections and we will return to pure unadulterated fascism. I am not real happy with that outcome.

If it takes the Nuclear Option to resolve the problem and produce a proper bill then so be it. A proper health care bill is a bill that expands Medicare and/or has a solid Public Option as the cost control component. It is the expansion of the government backed pool of medical customers (monopsony power) that controls costs. Increasing the number of government represented consumers is the key to cost control.

At present some physicians are refusing to accept Medicare patients because of the government attempt to control costs. This implies that Health insurance companies are paying too much and passing those costs back to business that pass the costs back to the wage earners. If the number of government represented persons is dramatically increased, the providers will not be able to stay in business by overcharging insurance companies and other patients not represented by government.

TheTrucker said...

The major part of the solution to this problem lies in the broadening of the Medicare tax and A MIDDLE CLASS tax cut in the form of Medicare rate reduction. "CLASS WARFARE" is the only solution to this dilemma. The test for that has already been conducted in the House Bill on Health Care. In that bill, the rich were going to pay for the subsidies to the poor. That bill was well received until the Republicans ran their fear campaign. And before the "parade of lies" could be addressed the Senate took over. The Senate bill sticks the cost of the subsidies on the middle class and they are the majority; we now have an exercise in "progressive" foot shooting.

All economists are hereby encouraged to spend what I certainly thought a very interesting 50 minutes watching The Century of the Self. "Political economy" is the proper name and scope of what is called "economics". The economic "rules of the game" are not set by economists.

If the Medicare tax is broadened to include all types on income as opposed to just being a tax on wages while reducing the tax rate (a tax cut), the additional revenue would be more than sufficient to finance the entire subsidy program without any tax on Cadillac insurance. And the "medical cost ratio" can be the primary control on runaway insurance company takings. Unlike Social Security, Medicare benefits are not tied to the amounts of wages earned. All persons who qualify for Medicare receive exactly the same benefits. So why is the Medicare tax paid only by people who have to work for a living? The inclusion of "all over 65" regardless of whether they worked for a living or received only _UNEARNED_ income would increase the cost of Medicare by 2.3% while revenue could be increase by as much as 27% (I think).

FURTHER and perhaps more importantly:

These funds must be OFF BUDGET funds spent _ONLY_ on traditional Medicare for the elderly _AND_ subsidies for the disadvantaged. The accounting must make these operations absolutely transparent. Ending the "cloture" rule in the Senate seems to be the only viable method for restoring responsible government and protecting the middle class from corporate aggression.

r l love said...

Bruce Webb posted an interesting piece on AB a couple weeks ago having to do with a provision in the HC bill regarding a minimum loss requirement ratio. I am not the best person to explain this, and maybe Bruce will see this and help me out some, but I do see the need for deceit to move forward so there is one aspect here that I may be well suited to explain.
This MLR is based on how much from the gross of premiums the insurance industry keeps. They keep about 20% and the bill is somewhat vague about this percentage but the bill says clearly that the government reserves the right to adjust this MLR as needed. So it occurred to me that this could be a clever trap. The insurance industry might see this as protection as they are required to take on more risk as a result of their inability to refuse customers and to limit claims. But the bill does not specify that the MLR might only adjust in their favor. So it is conceivable that they might be overly confident in their ability to influence the regulation of this ratio. But the need to subsidize most of the those coming onto the roles puts their economic best interest in alignment with the governments. And this MLR has a rebate mechanizm that could allow regulators to dictate down to whatever level they deem fair, just about everything in regards to profit, including industry compensation levels. And considering that allows a regulator who is paid a reasonable salary, a say in what over-paid execs are paid, this provision seems to have its incentives in order. But, like I suggested above, I have not studied this much. Bruce plans to revisit the issue in another post but I don't know any more than that.
ray l love

TheTrucker said...

Actually the "Medical Loss Ratio" is the loss that the shareholders of the "investment fund" incur due to having to actually pay out benefits that they sold to the marks (the insurance customers). It is expressed as a percentage of premiums and the lower it is the more the stockholders like it.

This one tool is probably sufficient to control the insurance company takings because constant transparency is the key to proper government/popular oversight. And it will be very clear after a time that the profit motive is a detriment to insurance efficiency. It is the transparency that reduces operating costs in an endeavor totally dictated by statistics; not tricks and slight of hand.

r l love said...
This comment has been removed by the author.
r l love said...

I did not intend to say that the slight of hand was in the regulating, but instead, in the passing of the bill. And my mind is suffering from acronym overload syndrome and there is no cure.
After posting, it occurred to me that I should have said more about how what I "tried" to say relates to what you said in the last paragraph of your first comment: The MLR regulating could have a chain reaction affect that causes the insurance industry to apply pressure to the medical industry without the PO.

January 18, 2010 6:10 PM

TheTrucker said...

The limitation of profits at the insurance company will have little direct effect on payments for services at the provider level. But there is an indirect interest with or without the profit limitations. Insurance companies can negotiate provider rates based on the number of people represented. This grants a natural advantage to larger insurance companies but it grants major leverage to the insurance sector as a whole.

Most people who look at the bill they receive from a provider will notice that the insurance company has negotiated the payment for the services to a smaller percentage of that charged to the general public. This dramatically increases the cost of services to the non insured and _compels_ the non insured to join an insurance company. It is very similar to a classical "protection racket". Those who do buy in to the protection will be bankrupted by the _RATES_ they will face without the protection of an insurance company representing them.

It isn't the actual costs that bankrupt us. It is the inflated cost that we, as individuals with no "union" representation (and I use this term because it fits) have to pay for the services. And as more and more are bankrupted then the _RATES_ are driven even higher.

This is what the strong "public option" and the Medicare buy in are about. Both of these provide a "medical services buyers union" outside the for profit insurance market. This buyers union would work just like the insurance company "union" and negotiate rates for this new pool of people. Even in "high deductible" plans, the lower negotiated rates for services offset much of the premium costs.

When all are covered there are no more protection rackets and no more bankruptcies and the costs of medical services are contained. And this gets us back to WHY more people being covered by insurance of any kind will actually reduce the real costs of medical services. There just won't be enough people left without representation onto which these ridiculous fees can be foisted.

That's my story and I'm sticken to it.

run75441 said...


Actually the MLR does precisely that, in that id forces insurance companies to apply premiums to the actual costs of insuring a person. A younger person would come in at a far lower rate as a result and the 3:1 ratio for older and the 1.5:1 for self-inflicted damage would be based off of that lower rate for the younger. It is 85:1 for group coverage and 80:1 for individual coverage.