Getting serious about health care costs

I wrote previously about the myth of Social Security insolvency. Conservative politicians — pretending to be fiscal realists who understand we must make difficult decisions to cut aid to the elderly — have been trying for decades to get rid of the program on trumped on charges that it cannot be sustained. Although the conservative claims that there are dire problems with Social Security are clearly false, the claims about problems with Medicare and Medicaid are more accurate.

According to CBO projections, under current federal law, Medicare and Medicaid spending will rise from 4 percent of GDP in 2007 to 19 percent in 2082. This is undeniably a problem. However, it is not a problem created by government largess and inefficiency; rather, it is a problem with health care costs in general. In the same projection, CBO estimates that total private and public spending on health care will rise from 16 percent of GDP in 2007 to 49 percent in 2082.

The basic problem is that health care costs are increasing at a rate higher than the growth of GDP. Between the years 1975 and 2005, health care costs increased at an annual rate that was 2.1 percent higher than the rate of GDP growth. This sort of growth will very quickly get out of control. When it comes to Medicare and Medicaid spending then, conservative concerns about future insolvency are actually serious. Unsurprisingly, their proposed policy remedies to the pending crisis have been universally bad.

The most prominent suggestion so far has been from Paul Ryan who has proposed to create a voucher-like system for Medicare. Under Ryan’s plan, a voucher would be given out to seniors that they could use to buy private insurance in an exchange. Under this plan, the amount of the voucher would only increase by the amount of inflation. However, health care costs have risen and are projected to rise at a rate much higher than inflation. In the 30 years from 1975 to 2005, the costs increased at a rate more than double the Federal Reserve’s 2 percent inflation target. By pegging the increase in the voucher to inflation instead of health care inflation, Ryan does not decrease costs; he just shifts the costs to the elderly. The CBO’s analysis of his plan (pdf) predicts that by 2030, the voucher would only cover 32 percent of the average Medicare recipient’s health care expenses.

In addition to Ryan’s plan, conservatives have thrown out the idea of increasing the Medicare eligibility age and means-testing the program. As Paul Krugman points out, neither of these proposals makes good sense. They increase the complexity of the programs while only achieving very modest savings. Additionally, like Ryan’s plan, both approaches do nothing to reduce overall costs; they only shift the costs to individuals. In the case of raising the qualifying age, the costs will be disproportionately shifted to poor people and people of color as those populations have shorter life expectancies.

Getting serious about Medicare solvency requires that we get serious about reducing health care costs in general. In his new book, Dean Baker offers two rarely discussed ways to reduce health care costs quickly. The first is the elimination of drug patents. Although they are taken for granted as necessarily existing, drug patents — and patents in general — should be understood as artificial, government-issued monopolies over the production of a certain drug. This government-issued monopoly allows pharmaceutical companies to charge exorbitant prices for prescription drugs which drives up costs for individual consumers and government programs like Medicare.

By constructing a non-competitive marketplace for life and death products like drugs, government policy undermines its own interests in reducing health care costs. Baker claims that consumers and the government pay around $270 billion more per year for prescription drugs than they would without drug patents. Patents are usually held up as necessary to incentivize drug research, but as Baker points out, the government already spends $30 billion a year through the National Institute of Health on medical research. Increasing that by another $30-$80 billion could completely replace the drug research being done in the private sector, an increase which would be more than offset by the massive savings on patent-free prescription drugs.

In addition to eliminating drug patents, Baker also suggests in a previous book that we use the tactics of free trade already used against low-wage earners to depress the wages of doctors. As it stands, doctors in the United States benefit from exorbitant salary levels that result from proctectivist licensing restrictions manufactured by the American Medical Association. They also benefit from policies which make it difficult for professionals to immigrate to the United States and practice, professionals who would likely demand less for their services. Doctors in the United States presently make about twice as much as doctors in other wealthy countries do. Intentional policies to increase competition among doctors in the United States would likely put downward pressure on the salaries of doctors which would ultimately decrease health care costs.

The last big way to decrease health care costs, although not a suggestion mentioned by Baker, is to implement a single payer health care system. Single payer systems across the world have much lower administrative expenses than private insurers which decreases the cost of health insurance to consumers.

These three proposals are just a few ways to get started cutting costs, a policy approach which will both reduce government expenditures and overall health care spending in the economy. Medicare and Medicaid are not the problem and never have been; spiraling health care costs are and will continue to be. Any approach which is not focused on bringing those costs down or checking their growth should be immediately dismissed as non-serious. That conservatives have endorsed none of these approaches and continue to pursue merely cost-shifting — an approach which is still unsustainable as the CBO projection demonstrates — reveals their self-proclaimed fiscal realism as the posturing that it really is.

Hurricane Irene spares the nation from corporate MLK dedication

The Martin Luther King Jr. memorial on the National Mall was set to be dedicated this coming Sunday, but that dedication has been postponed due to Hurricane Irene. While I do not have any strong feelings one way or another about the monument itself, the way in which it was set to be dedicated has piqued my interest.

In order to raise money for the MLK memorial, Alpha Phi Alpha solicited donations from corporate sponsors. The list of corporate sponsors include the General Motors Foundation, Chevrolet, the Tommy Hilfiger Corporate Foundation, Aetna, Boeing, BP, Coca-Cola, Delta Air Lines, GE, McDonald’s, Travelers, and Walmart. These sponsors were given distinguished titles as either Dedication Chairs, Co-Chairs, or Vice Chairs.

Given MLK’s staunch anti-capitalism, the inclusion of any corporate sponsors in public roles is extremely bizarre. Corporations involve themselves in projects like this in order to boost their public image so that they can further their oftentimes exploitative enterprises. For instance, the BP_America twitter account has managed to mention its involvement in the monument 26 times in the last 2 days. I feel safe speculating that Martin Luther King Jr. would rather have no memorial at all than one which allowed massive corporations like BP to score public relations points.

In addition to the general absurdity of a corporate-sponsored MLK monument, the specific list of corporations involved in the sponsorship includes some of the worse corporate actors out there. Does anyone seriously think that MLK would be supportive of naming Wal-Mart, BP, and Coca-Cola of all corporations as Dedication Vice-Chairs for a monument in his honor?

Recall that Martin Luther King once argued:

A true revolution of values will soon look uneasily on the glaring contrast of poverty and wealth. With righteous indignation, it will look across the seas and see individual capitalists of the West investing huge sums of money in Asia, Africa and South America, only to take the profits out with no concern for the social betterment of the countries, and say: “This is not just.”

For those not aware, the capitalistic behavior being condemned by MLK in that quote exactly describes what Coca-Cola does in South America, what Wal-Mart does in China, and what BP has done all over the world, most notably in Iran. It seems obvious that MLK would disapprove of any association of himself with those corporations.

Recall also that King died fighting for garbage men who made inhumane wages, were treated poorly, and who were aggressively prevented from exercising their rights to collectively bargain. McDonald’s and Wal-Mart famously do all of those things to their millions of low paid workers whose rights to unionize have all but been stripped from them by the companies’ corporate practices. Once again, I cannot see MLK wanting anything else but to distance himself from Wal-Mart and McDonald’s, something this monument’s partnership does the opposite of.

Finally, recall that King vehemently criticized U.S. militarism, specifically in relation to its involvement in Vietnam. In his famous anti-war speech, King decried the cancer of militarism. He remarks at one point in the speech:

When machines and computers, profit motives and property rights are considered more important than people, the giant triplets of racism, militarism and economic exploitation are incapable of being conquered.

King no doubt has in mind many things in that sentence, but prominently in his consideration is militaristic war profiteering. This of course is where Dedication Vice-Chair Boeing makes a significant chunk of its money. The Boeing corporation builds all sorts of war planes and munitions, grabbing up hundreds of billions of dollars in government expenditures that King rightly argued would be better spent on programs of social uplift.

The inclusion of these corporations should really be seen as an embarrassment for the organizers of the MLK monument. There is little doubt that MLK would be embarrassed to be associated with any of them, something Alpha Phi Alpha apparently did not consider or did not see as important. Ultimately, it probably matters little what happens with this monument: King’s profound radicalism on issues of economic injustice and militarism has already been erased from the popular historical record. That we can even have a monument built on the National Mall that war contractors and union busters are willing to sponsor demonstrates that.

With that said, there is still something rightly repugnant about the Martin Luther King Jr. Memorial brought to you by Coca-Cola.

Conservative claims about stimulus are wrong

The debate about the stimulus was fairly vacuous from the very start. Pundits with apparently little understanding — or worse an agenda to misrepresent things — would chime in on whether it worked. Of course, posing the question in terms of working or not working is already massively confused. Any serious discussion on the stimulus would center on the impact it had.

The Congressional Budget Office put out another report this week estimating the impact of the American Recovery and Reinvestment Act in the last quarter. The CBO estimates that in the second quarter of 2011, the stimulus increased real GDP by 0.8-2.5 percent, lowered the unemployment rate by 0.5-1.6 percent, and increased employment by 1.0-2.9 million people. There are of course other academic studies on the stimulus, the majority of which — as you would expect — point to some positive impact of the stimulus.

Conservative commentators deny this reality with predictably weak and undeveloped arguments. Admittedly, it may not be worthwhile to even engage the mainstream conservative pundits because they are almost certainly not arguing in good faith. Nonetheless, one thing that consistently pops up in their talking points is that the stimulus “did not work.” What is meant by this is somewhat unclear. At times, it appears that because unemployment continued to rise after the stimulus, they take that to be proof that it did not have a positive impact.

This sort of point is just analytically confused. The proper way to measure the impact — as the above studies do — is to estimate what would have occurred without the stimulus and what did occur with the stimulus. If unemployment would have risen by 3 percent due to the state of the economy, but only rose 2 percent with the stimulus, then any serious analysis counts that as a positive.

Other conservatives seem to take the question of whether it “worked” a bit too seriously, believing that the analysis called for in the case of the stimulus is truly binary. This of course is false. Decreasing umemployment by 3 percent is better than decreasing it by 2 percent which is better than decreasing it by 1 percent or not at all. There is no point at which one would say it worked or did not work; there is only bigger and smaller impacts.

What is odd about the conservative framing of this issue is that it is unnecessarily extreme. I realize from a public relations point that it is probably more compelling to send out messaging that talks about the stimulus having no impact or a negative impact. But given that it is undeniable that it had some positive impact relative to the counterfactual world in which no stimulus occurred, any serious right-wing critiques would focus on the trade-offs of the stimulus. Was 700 billion dollars of debt worth a 1 million jobs, a couple of percentage points for the GDP, and a slightly lower unemployment rate?

Debates could certainly be had on that front. But instead of taking that more honest approach to critiquing the stimulus, the right wing messaging continues to make claims that are demonstrably untrue. In a more informed society with better media outlets that sought truth instead of artificial balance and sensationalism, these misrepresentations and lies about the effects of the stimulus might harm the right wing. But in our present world of public relations dominated politics, they almost certainly do the opposite.

That is not to say that the stimulus was all that great. As most Keynesian economists at the time were pointing out, the size of it was far smaller than it should have been for the impact it was trying to achieve. Providing a Keynesian boost to aggregate demand that is half the size it should have been is kind of a strange policy. At the time, defenders of the administration remarked that the small size was not a problem because there was nothing limiting the injection of more stimulus later — a reassurance that has proven politically misguided.

With that said, as much as the left has rightly harangued the administration’s too weak stimulus policy, right wing commentators still manage to make their position on the stimulus even sillier. The reality is that the stimulus — whether it was too small or too expensive — has had a slight positive impact, all the hand-waiving, contrary assertions of the right wing notwithstanding.