Monday, February 20, 2012

How Economic Analysis Works: Using Models

Ok... lets stop pretending that you can label an entire action by the government as one economic model.

In sociology, we study all the models and learn how to use them as perspectives for understanding approaches to a problem.

Health care law... fascist?  Well, if you don't follow the law... you get shot in the head.  That is Stalin.  That is fascist.

Socialist?  Socialism is on a spectrum.  And in a mixed-market economy like America... there is lots of it.  It works quite well, in synergy with the excesses of Capitalism.  It is a counterbalance to greed.

There is no program that has zero socialism in it.

Having a military is socializing the defense of a nation.  The government owns the business of war.  That is socialism.  The government hires private companies to make the stuff... that is Capitalism.

My point... it is all meshed together.  We understand things by counterbalancing all the perspectives until we find something we believe would be most effective.

Health care came FROM - hospitals and the government paying for the uninsured as they show up sick.  And then passing off the cost to you.  Well, the current system was socializing the costs of the uninsured... and today - you pay for it.  That is the status quo.

Anything can be less socialist than that.

Libertarians like to believe their decisions don't effect others... until they are 27 years old and believe they will die... and show up at the hospital expecting treatment... paid for by someone else!  Just because they don't have insurance today... doesn't mean they want to die tomorrow.

So - those are the extreme positions.

What if we had extreme capitalism.

Forget about the fact that we are in the wealthiest country on the planet.  If you can't afford health care yourself... when you show up in the hospital... it is survival of the fittest... and you will die.  You aren't going to cut into the profits of anyone else.

Well - truthfully, I don't like the sound of that version of America.  And this is why we have a mixed-market system that draws from each economic perspective.

Any one of these economic models in their pure form is crap.

Communism for example is a horrible system.  However, the current Chinese model, which is a synergy between Capitalism and Communism is producing 10% growth rates in their economy.  (Not to mention a poor record on human rights!)

So... here is the analysis of the health care law.  The way analysis really happens.
By looking at the parts... seeing how the best elements of a variety of perspectives can help us find a choice somewhere in the middle... that works best.

Let's jump into the sausage factory.

First: Let's end the socialist element.  If you show up in the hospital uninsured, you should not expect service.  Why?  Right now, your family pays about $1000 more a year in insurance premiums (to cover half the cost the hospital passes on to you when it raises prices) and the government (funded by your taxes) pays for the other half of the cost... also passed on to you.

Why is that socialism?  We take the cost someone else incurs and socialize it.  The capitalism side of the equation raises the market cost for all services that you will partake in if you are insured, to cover it.  The federal government will own part of that cost as well.

But, there is a value here.  A value that in the wealthiest nation on Earth people should not die on the floor of a hospital waiting room just because they don't have insurance.  Previous generations came here as brave immigrants and they didn't have their act together when they got here.  Some people still don't.  But, it doesn't mean we should impose a death sentence.

The 19 year old kid who lives on his own... doesn't need to die to teach the all important lesson that he is not invincible.

Pause for some research?
You don't have to take my word for anything.  Here is a full study by the Kaiser Commission on Medicaid and the Uninsured.  Yes, this one is from 2004, but my guess is things only got worse after that.
The internet is amazing.  Everything is available.

Here is one passage from the report:
"Moreover, research shows that leaving a large share of the population without
health insurance affects not only those who are uninsured, but also the health and economic wellbeing
of the nation. Yet, despite these findings, the number of uninsured Americans continues to
grow. Although the national debate over ensuring health coverage for more Americans periodically
gains momentum, it then stalls—perhaps in part because not enough is known about both the
benefits and the costs of expanding coverage to more, if not all, of the uninsured."

As my Grandmother would say... Democracy only thrives when the population is involved, educated, and informed.  Well, hopefully, there is some info that can help inform you.

A shortcut:  In 2004 the total dollars involved in health care for the uninsured... "$124,500,000,000."  So, the being uninsured does not mean their health care is free.  It does not mean that somewhere, nobody is paying for it.  It may mean that the uninsured are being paid for in the least effective way.  

Total health care spending in 2004 was about $1,500,000,000,000.  So maybe if there are some easy to pin-point issues with the system... it would pay to address them rather than kick the can down the road and ignore systematic problems for another 80 years.  There has got to be some low hanging fruit in a system that big.

"In 2001 hospitals accounted for over 60% of uncompensated care dollars;" hmmm.... so, somebody is already paying for it.  "The primary source of funding for uncompensated care is government dollars."  Ok.  So when they don't have insurance... it is already expensive for anyone in America  who pays taxes.

They call these "DSH payments."  "Payments intended to offset losses hospitals incur when large shares of their patients are unable to pay their hospital bills."

That was the status quo.  That is how the system operated before we changed.
Again.  In economic analysis... cost/benefit analysis... one must consider the new plan in the context of what exists today.

Part 1: We are already paying out the nose for the uninsured.  Part 2: "The uninsured who are without coverage for the full year receive about half (55%) of the medical care per person compared to those who have health coverage for the entire year, even after taking uncompensated care into account."  So, part 2: We pay... they get crappy... insufficient care.

"Compared to persons who have health insurance, the uninsured:
• receive less preventive care,
• are diagnosed at more advanced disease states,
• and once diagnosed, tend to receive less therapeutic care and have higher mortality rates."

So, this is a problem people are dying from.  And they do not get the benefit of small preventative actions that are far less costly.

Again: I return to the premise... there are costs that remain by doing things the way we have... in the context of what was the status quo.

So, how much would it cost to cover all the uninsured?  Based on what the insured are spending a year, the cost would go from $125,000,000,000 that the uninsured spend now to a walluping... $173,000,000,000.  (For all of this, I am using the same source - the Kaiser Commission report.)

The interesting thing is that it has been so hard politically to touch health care reform that we can't even touch the programs we know are working horribly without people going nuts.

Medicare Advantage... well, that has been working horribly.  Medicare has been far more effective.  By slashing Medicare Advantage you can make up the difference between $125 and $173 billion dollars... and bingo... more people have... (What?) private insurance under the new model rather than the government program.

Aka.  We cut out a large socialized medicine program... to have the money to provide incentives... and maybe subsidize the cost of people being privately insured when they can't afford it.

Now, this has some people crying, "Tyranny," "Fascism..." Well, I've got news for you.  Hitler was as fascist.  His plan was... if you don't have blond hair and blue eyes your medical treatment is a gas chamber.

It is hard to define efforts that rely on more intelligent uses of money to cover 44 million more people so that they can be healthy... as fascism.  I'd rather define it as... "Uncommon sense."  What people would do if they took the time to develop some sense!

Another quote from the article,
"A benefit of a comprehensive rather than an incremental approach to covering all of the uninsured
is that some of the public money already being used to pay for care received by the uninsured
could be reallocated towards the cost of insurance. However providers caring for the uninsured
now, primarily hospitals that now receive the largest subsidies for uncompensated care, may be
reluctant to relinquish their existing subsides unless assured that all people will have health

Aka: If you are going to do it, you've got to go all the way.  Everyone needs to be insured or you don't get the buy in from the hospitals.

So - in 2004 - the writing was on the wall for how to solve the problem of the uninsured.  How to fund it.  How to get the buy-in of hospitals.  And how to do it in a way that gets more people off public programs and into private insurance.

Another element of the status quo at the time was, there was no leader gutsy enough to take on health care reform.  In fact, Bush went around the country trying to save social security... when health care was the bigger problem.  Along comes Obama and he says essentially... "I can take the heat."

Well - here is a comparison of costs and benefits to expanding health coverage.  Heck, I'm going to copy and paste all of page six of this article:


How do the costs of expanding health coverage
compare to the benefits?

Research showing that having health insurance positively affects the use of health services is clear
and widely accepted—and the case has also been made that having health insurance leads to
improved health and longer lives by means of better access to medical care.
• A conservative estimate based on the full range of studies is that a reduction in mortality of
5-15% could be expected if the uninsured were to gain continuous health coverage.1
• It has been estimated that the number of excess deaths among uninsured adults age 25-
64 is in the range of 18,000 a year.2
• The annual economic value of foregone health among the 40 million uninsured in 2000 has
been estimated to be between $65 and $130 billion in that year.3 If the middle of that
range ($97.5 billion) is inflated to 2004 dollars, the annual economic value of the foregone
health of those 40 million uninsured increases to $103 billion—a sum considerably larger
than the $48 billion in increased costs of expanding coverage to all of them.
The additional $48 billion/year of medical spending needed to provide universal coverage, beyond
what is currently being spent, can be viewed from several broader perspectives:
• Relative to current government spending for public health insurance programs and the
subsidization of private insurance in 2004, the additional spending to cover the uninsured
is relatively small.
o Medicare will cost $266.4 billion;
o Medicaid will cost $280.7 billion;4 and
o the tax subsidy for private insurance will be $188.5 billion5
• The new dollars would constitute less than 3% of total personal health care spending in
this country.
• The $48 billion would increase the share of GDP going to health care by 0.4%.

Wait a minute... So... by covering 44 million people we only increase the share of GDP going to health care by .4%?  And in the process we are carrying out economic activity... which itself increases the GDP... So... it might night even be that much of an impact at all.
Jump to page 14 of that article.  Yes, we can assume there are costs and benefits to insuring the uninsured.  But, people... I've never heard a single person consider the actual costs of NOT covering the uninsured.

Here are three main reports from 2003 on the topic.

The project’s major reports, published in 2003, include:
“Sicker and Poorer – The Consequences of Being Uninsured: A Review of the Research
on the Relationship between Health Insurance, Medical Care Use, Health, Work, and
Hadley, Jack. Medical Care Research and Review, 60(2) Supp. June 2003
Available at:
“How Much Medical Care Do the Uninsured Use, and Who Pays for It?”
Hadley Jack and John Holahan. Health Affairs (Web Exclusive). Feb. 12, 2003
Available at:
“Covering the Uninsured: How Much Would It Cost?”
Hadley, Jack and John Holahan. Health Affairs (Web Exclusive). June 4, 2003.
Available at:

Ok - so something has happened here.

Something I do not hear in the national discourse... in an economic analysis I used data from empirical research and not talking points.  Just curious... in all the great debate back and fourth on health care... has anyone heard any dollars and cents talk in this economics issue?

NO.  It is being played around with and messed with to our detriment as a political issue.  Well, this is health care and economics... it should be about health outcomes and dollars and cents decisions... not politics!

If you are informed on this now and you hear people fighting about health care... help them make a distinction between when they are talking pure politics, health outcomes, or dollars and cents - the economics of it.

Decisions on health care should be made by health outcomes and dollars and cents smart choices.

Conclusion:  By the report above... getting everyone covered on private insurance will be cheaper than having the current government programs... even if we have to pay some of the costs... there are great benefits to paying those costs - society wide - and if we don't bring everyone into the system... hospitals won't go along with it.

So - one might say... the only way forward that makes sense for health outcomes and economics is a system everyone is in... and the only thing in the way is politics?  Huh?

So - we should allow our system to remain totally screwed up... ineffective... with more people on government programs... because... of politics?

That sounds stupid to me!

Let's put health first.

So - it sounds like some sort of individual mandate... partially paid for by those who can't afford the insurance would go right at the heart of the solution of most of the problems of the uninsured right there.

Well - that is, "ObamaCare."  How do you feel about it Mr. Romney?

Yeah - lets talk to a prominent Republican on the issue.
What does Mitt Romney have to say about an individual mandate?

Wait - did he just call it the Republican free market approach to health care and blame Democrats for the status quo?

Is there any more blatant, overt, playing of politics rather than focusing on health outcomes than what I just saw?  NO!

Let's go one step further.

Let's return to something I posted earlier.

The man who helped Romney create his Massachusetts plan is the same guy who helped Obama write his.  And he is a little pissed at Romney because the plan was the most effective ever and 98% of people in Mass are covered now.  The highest in the nation.


Let's not play.  HEALTH and our ECONOMY are on the line.

Note: In the video.  Dr. Sanjay Gupta is the CNN reporter.  He is a surgeon.

So - while playing politics they created a distortion of what socialism is... what the status quo is... what works... what they view as the capitalist free market model... what they did themselves and recommended nationally... and they did all this at the EXPENSE of our economy and health care in America.

Hmmm... Get Romney out of here... I can't look at him.

Funny thing is... we are riding the coat tales of some of his success... but, he is a giant liar in the process.

So - I've looked at a few angles... socialism... fascism... capitalism... and analyzed how some of these things happen.

Question: Is an individual mandate only free market capitalism if Romney does it... and it is socialism if Obama does it?

This is called leadership by confusing the hell out of everyone and being dishonest.

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