What do the Bush Administration's attempts to link Saddam's Iraq with 9/11 and the BusinessWeek cover story of June 18, '07 have in common? Both mislead Americans.
The BusinessWeek story and research by Michael Mandel is titled, "The Real Cost Of Offshoring." The rub is in the subtitle that says "U.S. data show that moving jobs overseas hasn't hurt the economy. Here's why those stats are wrong."
Anyone reading this and the text of the story would naturally think that offshoring (or some part of it) hurts the US economy, and stopping this offshoring will improve the economy. But the reverse still holds true.
All the article says is that the GDP growth is not being properly measured because of a "phantom" factor, so the growth may be half a percent less than calculated. This "would wipe out as much as 40% of the (reported) gains in manufacturing output."
What should have been emphasized is that cutting back on offshoring may protect specific manufacturing or service jobs, but it will make the overall US economy even less competitive and hence further reduce or even reverse GDP growth. UK under the much maligned and under-appreciated Tony Blair serves as a good counter-example. Its much fuller embrace of globalization and unrestricted offshoring of services has contributed significantly to its economic well-being and ten years of uninterrupted positive quarterly growth.
But BusinessWeek insinuates to the contrary. So people will draw the wrong conclusion about the many forms of offshoring, including international medical travel. Here's what I politely wrote to BW:
"Readers may draw the wrong conclusion from your June 18, 2007 cover story, 'The Real Cost of Offshoring.'
"Even if all the calculations and analyses are correct, it does not mean that putting the brakes on offshoring will improve the US economy, or even jobs and worker welfare in the long or medium term. On the contrary, in a globally competitive economy failure to embrace the efficiencies of globalization will make Americans worse off.
"Author Michael Mandel and economist Susan Houseman probably agree with this, but it needs to be stated explicitly."
I doubt they'll publish this.
Monday, June 25, 2007
Thursday, June 14, 2007
You Don't Get What You Pay For (QED)
This is somewhat new. Past studies have repeatedly shown US Healthcare to cost much more and yet deliver lower overall quality than in other developed countries. But now this Pennsylvania government survey as reported in the New York Times shows the same disparities among US hospitals themselves.
The hospitals with the highest costs for procedures like heart bypasses had worse outcomes and mortality rates than those that charged less than half as much. The high priced hospitals argued that their results were skewed by some very expensive procedures but even this doesn't explain most of the discrepancy.
The study hopefully also looked at median costs instead of mean costs. The former, which is what the patient at the 50th percentile or in the middle of the group would pay, removes the distortions of a few extreme payments and addresses the objections of the higher-cost hospitals. Most studies now also make so-called "risk adjustments" so that hospitals handling more complicated or difficult cases are fairly evaluated and compared.
As mentioned in an earlier post hospitals tend to be rewarded rather than penalized for their mistakes resulting in additional or extended treatment. I'm hoping these reports make Americans more savvy healthcare consumers who don't keep buying the "you get what you pay for" line. The same goes for insurers or employers who may be bearing most of the costs for their members or employees. In addition to improving domestic pricing and practices it will be a further impetus to medical tourism.
The hospitals with the highest costs for procedures like heart bypasses had worse outcomes and mortality rates than those that charged less than half as much. The high priced hospitals argued that their results were skewed by some very expensive procedures but even this doesn't explain most of the discrepancy.
The study hopefully also looked at median costs instead of mean costs. The former, which is what the patient at the 50th percentile or in the middle of the group would pay, removes the distortions of a few extreme payments and addresses the objections of the higher-cost hospitals. Most studies now also make so-called "risk adjustments" so that hospitals handling more complicated or difficult cases are fairly evaluated and compared.
As mentioned in an earlier post hospitals tend to be rewarded rather than penalized for their mistakes resulting in additional or extended treatment. I'm hoping these reports make Americans more savvy healthcare consumers who don't keep buying the "you get what you pay for" line. The same goes for insurers or employers who may be bearing most of the costs for their members or employees. In addition to improving domestic pricing and practices it will be a further impetus to medical tourism.
Wednesday, June 13, 2007
If They Don't Have Bread, Let Them Eat Hay
When a woman is dumping her boyfriend she may break it like good news, saying she'll always cherish him, and loves him enough to set him free. That's my reaction on seeing a WSJ report on Rudy Giuliani's healthcare proposals.
Though he'll release details later this summer, he wants to "free" tens of millions of Americans from employer based insurance and move them to the individual market "to give them more coverage choices." Mirroring GWB's "ownership society" he tells Americans "It is your health, you should own your own insurance."
At present it's the 60% of Americans covered by employer insurance who are the best off, and polls show they like their employers to use their collective purchasing clout to arrange insurance. Instead, Rudy is extending GWB's approach by wanting them to shop for their own care. According to another WSJ report this approach as it applies to the much hyped Health Savings Accounts (HSAs) is already starting to falter.
Of course, more choice to consumers can work well if it is structured properly, as in Edwards' or even Romney's plans where insurers cannot refuse insurance coverage or charge higher rates from sicker patients, and yet the overall pool of members remains viable because everyone including the healthy are forced to buy insurance. But Rudy opposes such compulsory insurance coverage.
Even worse, Rudy doesn't address the biggest problem of how to take care of the 47 million uninsured. Delinking insurance from employers and making it portable does little more than scratch the surface, and Rudy is silent about subsidizing or paying for coverage of those who cannot afford it. The tax breaks he offers for individual coverage have little meaning, especially for those who pay little or no taxes. And as I mentioned in an earlier thread, even for those who do, you get at most a $31 tax break for every $100 you spend on healthcare, so how will you come up with the remaining $69?
His "market forces" argument also is meaningless when you among other things (a) disallow the government from using its purchasing power to negotiate drug prices with companies who have monopoly power in selling them (thanks to their government enforced patents - they find no irony in the strong government role in enforcing these); (b) let providers like physicians restrict their own supply way below free market equilibrium; and (c) let hospitals maintain non-transparent pricing and quality information while gouging payers and patients who come their way and cannot switch in the midst of their treatment.
The way he lauds the "free market" over anything the government does makes me want to ask him why he doesn't urge everyone to buy their own weapons under the 2nd Amendment for self-protection and do away with the police force.
So why has Rudy come up with such a bad plan? He may figure this appeals to the fiscally conservative Right who want to minimize government spending and taxes no matter what, plus those Republicans who blindly (and wrongly) believe unrestricted private activity is always better than governmental involvement. He can also attract a lot of contributions from the healthcare industry players. This can increase his chances of winning the Republican nomination, and he can then change his tune (say to something like the Romney plan with greater government spending) well before the General Elections.
Will such a "bait and switch" strategy work? And will Rudy address some of the glaring deficiencies when he reveals the details of his plan later this summer? I don't know, but as of now I find it to be the worst of those put forth by the Presidential hopefuls.
Though he'll release details later this summer, he wants to "free" tens of millions of Americans from employer based insurance and move them to the individual market "to give them more coverage choices." Mirroring GWB's "ownership society" he tells Americans "It is your health, you should own your own insurance."
At present it's the 60% of Americans covered by employer insurance who are the best off, and polls show they like their employers to use their collective purchasing clout to arrange insurance. Instead, Rudy is extending GWB's approach by wanting them to shop for their own care. According to another WSJ report this approach as it applies to the much hyped Health Savings Accounts (HSAs) is already starting to falter.
Of course, more choice to consumers can work well if it is structured properly, as in Edwards' or even Romney's plans where insurers cannot refuse insurance coverage or charge higher rates from sicker patients, and yet the overall pool of members remains viable because everyone including the healthy are forced to buy insurance. But Rudy opposes such compulsory insurance coverage.
Even worse, Rudy doesn't address the biggest problem of how to take care of the 47 million uninsured. Delinking insurance from employers and making it portable does little more than scratch the surface, and Rudy is silent about subsidizing or paying for coverage of those who cannot afford it. The tax breaks he offers for individual coverage have little meaning, especially for those who pay little or no taxes. And as I mentioned in an earlier thread, even for those who do, you get at most a $31 tax break for every $100 you spend on healthcare, so how will you come up with the remaining $69?
His "market forces" argument also is meaningless when you among other things (a) disallow the government from using its purchasing power to negotiate drug prices with companies who have monopoly power in selling them (thanks to their government enforced patents - they find no irony in the strong government role in enforcing these); (b) let providers like physicians restrict their own supply way below free market equilibrium; and (c) let hospitals maintain non-transparent pricing and quality information while gouging payers and patients who come their way and cannot switch in the midst of their treatment.
The way he lauds the "free market" over anything the government does makes me want to ask him why he doesn't urge everyone to buy their own weapons under the 2nd Amendment for self-protection and do away with the police force.
So why has Rudy come up with such a bad plan? He may figure this appeals to the fiscally conservative Right who want to minimize government spending and taxes no matter what, plus those Republicans who blindly (and wrongly) believe unrestricted private activity is always better than governmental involvement. He can also attract a lot of contributions from the healthcare industry players. This can increase his chances of winning the Republican nomination, and he can then change his tune (say to something like the Romney plan with greater government spending) well before the General Elections.
Will such a "bait and switch" strategy work? And will Rudy address some of the glaring deficiencies when he reveals the details of his plan later this summer? I don't know, but as of now I find it to be the worst of those put forth by the Presidential hopefuls.
Friday, June 8, 2007
Murder On The Healthcare Express
In Agatha Christie's classic "Murder On The Orient Express" the famous detective Hercule Poirot is unable to solve a murder because the clues point to twelve people on the train. So he cannot identify the killer among them. Turns out that all twelve were involved.
This helps us understand the state of US healthcare. Okay, so it's not really murder of healthcare. Just a trillion dollars of annual extra spend (or half the US total) compared to say, France or Germany for same or worse care. As my article implies, roughly a third of the trillion dollars go to extra profits or earnings above "free market rates" to providers - drug companies, doctors, hospitals. The remaining two thirds of a trillion dollars is the inefficiency or "lose-lose" costs of keeping the current system in place.
How does this relate to the novel? If the high US healthcare prices were due to one factor unfairly enriching just one player, then that factor would have quickly been singled out and eliminated amidst the full glare of media and political spotlight. Instead we have multiple factors at play that enable each industry player to blame others and thus all can get away with "reasonable doubt."
Then of course with about $300 billion in excess rents at stake it is a no-brainer for the industry players to collectively plunk, say, a mere billion dollars annually to buy off (or "influence") policy makers. This helps to maintain the status quo or even alter it to further benefit the players. It's no accident that the drug benefit for seniors (Medicare Part D) costing about $43 billion annually are largely a giveaway to drug companies and private insurers with far less value to the seniors who are the professed beneficiaries. And Paul Krugman in one of his several articles describes how positive government involvement such as a VA (veteran's) health system built up in the Clinton era is stymied by business interests and their Conservative allies.
Lest all this is too general, let me recap some activities by industry players contributing to high US healthcare prices:
This helps us understand the state of US healthcare. Okay, so it's not really murder of healthcare. Just a trillion dollars of annual extra spend (or half the US total) compared to say, France or Germany for same or worse care. As my article implies, roughly a third of the trillion dollars go to extra profits or earnings above "free market rates" to providers - drug companies, doctors, hospitals. The remaining two thirds of a trillion dollars is the inefficiency or "lose-lose" costs of keeping the current system in place.
How does this relate to the novel? If the high US healthcare prices were due to one factor unfairly enriching just one player, then that factor would have quickly been singled out and eliminated amidst the full glare of media and political spotlight. Instead we have multiple factors at play that enable each industry player to blame others and thus all can get away with "reasonable doubt."
Then of course with about $300 billion in excess rents at stake it is a no-brainer for the industry players to collectively plunk, say, a mere billion dollars annually to buy off (or "influence") policy makers. This helps to maintain the status quo or even alter it to further benefit the players. It's no accident that the drug benefit for seniors (Medicare Part D) costing about $43 billion annually are largely a giveaway to drug companies and private insurers with far less value to the seniors who are the professed beneficiaries. And Paul Krugman in one of his several articles describes how positive government involvement such as a VA (veteran's) health system built up in the Clinton era is stymied by business interests and their Conservative allies.
Lest all this is too general, let me recap some activities by industry players contributing to high US healthcare prices:
- Trial lawyers and the ABA styming tort law reforms and capping of malpractice damages.
- Drug companies overcharging for drugs by mislabelling government negotiations as "price controls" and taking advantage of a system where patients pays a fixed deductible. So patients don't care about prices, even when drugs have only marginal extra benefit.
- Doctor bodies controlling the physician pipeline to ensure that there's a shortage of doctors, instead of letting free market forces determine the supply.
- Hospitals consolidating to gain monopoly pricing power, and refusing to provide transparent pricing. In the process they often charge outrageously ($10 for an ibuprufen or aspirin pill or $75 for a box of tissues.)
- Private insurers opposing a competing public plan. I'm all for private insurance, but why not allow competition without unfair subsidies by a government institution? (P. 4 of 7 of John Edwards' plan envisages this.)
That's only five activities and players. Apparently you don't need twelve like in the novel to get away with it.
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