Scapegoats for Inequality

Inequality clearly exists and is even pronounced compared to other periods. AOC, Bernie Sanders, Robert Reich and others from the left have challenged the legitimacy of the very existence of billionaires, though I wonder if this includes Taylor Swift, Oprah, Steven Spielberg, and Tiger Woods.

The assumption that the existence of billionaires is the cause of the problems of the poor and middle class is zero sum thinking. The high price of gasoline, beef, housing, medical care, and higher ed is not the fault of the rich; it is caused by the very government they herald as the solution to the problem. Further these problems are more pronounced in the blue states that have had one party control for decades.

Billionaires are not conspiring to drive up the costs. Billionaires and the very wealthy are not a monolithic group; there are liberals and conservatives among them. While the wealthy are able to influence government policy, they also have the ability to champion positive changes to it. Fighting this influence is one of government policy more than a commentary on the morality of wealth.

Nor are the answers radical changes to the constitutional structure. The problem is not the electoral college, the structure of the Supreme Court, or the need to add Puerto Rico and DC as new states. The answer is policy to relieve the problems of the working and middle class.

There are changes that have merit and should be considered, but the government has little credibility and trust. Many of the wealthy are willing to pay more taxes but have little faith it will be spent to address the problems. The inability to bridge partisan divisions and enact meaningful reform has instead fueled class warfare, political pandering, and the search for convenient scapegoats.

Federalism and Health Care

From Kevin Williamson at National Review. Debating Obamacare, Again, and Again:

Because we have an election coming up, some people are shouting “Health care is a right!” while others are shouting that federal efforts to make insurance more affordable are “Socialism!” That kind of emotionally hyper-charged moralistic language almost always goes along with policymaking incompetence, and it is put forward as a substitute for thoughtful program design. It thwarts efforts to achieve consensus.

Consensus is a factor in good program design, too. Consensus is not about good feelings or being nice to the people on the other side of the aisle — it is a practical consideration, one that Barack Obama et al. were, unfortunately, too arrogant to account for in 2009. The ACA system was never going to be implemented as written, because there was no consensus supporting the program. There were partisan divisions, obviously, but there also were divisions within the party coalitions: It was Democratic interest groups, notably labor unions, that opposed the so-called Cadillac tax and other revenue-raising measures. It wasn’t Republicans in the pocket of Big Business who worked so hard to eliminate the medical-devices tax — it was Senator Elizabeth Warren, who just so happens to have a number of medical-device manufacturers in her home state. Republicans are split about having the government negotiate prescription-drug prices, reimportation, and other marketplace interventions. Even continuing Democratic control of Congress would not have saved the ACA from years of constant revision, because most Democrats object to some of what’s in it and many Democrats object to it fundamentally, preferring instead an NHS-style monopoly system. Democrats cannot even agree among themselves about whether there should be private health insurance; it is unlikely that they are going to be able to come to a consensus with more market-oriented Republicans on the matter of health insurance.

Because we have a federal system with 50 states, a federal government divided into three branches with the legislative branch further subdivided, and strong constitutional constraints on government action, it takes a high degree of consensus to get anything meaningful and stable done on big national social-policy questions. Even smaller countries with less social diversity and less robust constitutional constraints run into that problem: In Sweden, for example, is the archetypal Nordic welfare state, but it does not really have a national health-care system. It has a series of regional and municipal programs, locally administered and mostly funded with local taxes. Think about that: A country known for having effective public-sector administration and very high taxes still finds it sensible to do things at the local level, in spite of its having a population smaller than that of Ohio. It is easier to achieve a relatively high level of consensus and buy-in at the local level. That is part of the conservative case for federalism — the United States is big enough to have both Greenwich, Conn., and Las Vegas; Silicon Valley venture capitalists and Texas cotton farmers. And developing one model of health-insurance regulation, one model of education, one model of air-pollution regulation that serves the needs of all those very different communities and comports with all their social and economic priorities is close to impossible. The progressive mindset, which is trapped in an outmoded factory model of society, favors uniformity and homogeneity in policy and practice because it assumes that the economies of scale that are at work in a steel mill or oil refinery also apply to education and health care.

HKO

Healthcare does more to illuminate the divide in political ideology than any other issue. It merges the ideological and pragmatic limits of central power; the dispersal of interests (and thus the difficulty of consensus) and the dispersal of knowledge, the ‘fatal conceit’ that any central power can know how to manage complex markets for a vast and diversified nation. Health care challenges the authority and the competence of central power.

Another irony occurs to me. The Progressives in the first Progressive Era sought to bust the trusts and monopolies because they feared the effect of the their concentrated power on society. Yet they emulated their philosophy of concentrated power in the hands of the government and even replicated their structures in federal bureaucracies. FDR and the New Deal micromanagement agencies shared a disdain for the ‘wasteful competition’ of the free market, and its political equivalent, federalism.

Covid Thoughts 2020 04 25

The purpose of the shelter in place requirements was not to reduce the total number of cases, but to keep a surge in cases from overwhelming our medical capabilities. Isolating the highest risk people and avoiding crowds that allows it to spread faster made good sense and still does. There is still many unknowns about the disease, but as new data is absorbed we need to adjust our response. Flexibility is essential; the worst thing we can do is become emotionally or politically attached to early information and responses.

New data indicates that the disease arrived here much earlier than we thought, has already spread to many more people than we thought, and based on the estimated cases as compared to diagnosed cases the mortality is much less than we thought.

From The Wall Street Journal, The Bearer of Good Coronavirus News:

That will require more testing. Dr. Ioannidis and colleagues at Stanford last week published a study on the prevalence of coronavirus antibodies in Santa Clara County. Based on blood tests of 3,300 volunteers in the county—which includes San Jose, California’s third-largest city—during the first week of April, they estimated that between 2.49% and 4.16% of the county population had been infected. That’s 50 to 85 times the number of confirmed cases and implies a fatality rate between 0.12% and 0.2%, consistent with that of the Diamond Princess.

Also The New Antibody Evidence:

According to New York City data, the fatality rate for those over the age of 75 is 2.5 times greater than those between 65 to 74, eight times higher than those between 45 and 64 years, and 69 times than those 18 to 44 years. A recent Stanford study found that those under 65 with no underlying conditions such as diabetes or hypertension made up 1.8% of deaths in New York City.

The virus dissipates from one of two paths: herd immunity or a vaccine. A vaccine is maybe a year or more away and shutting down the economy that long may be like dropping the speed limit to 5mph to reduce traffic deaths. Testing only solves a part of the problem. If you test not to have the antibody you are still at risk if you mingle with those that do. It is better to identify the high risk and protect them as much as possible, and to continue the new hygienic protocols we are accepting. Who would have though a few months ago we would see so many in public wearing face masks?

Is it better to take the risk while the weather is warming than bear exposure during the fall and winter? No. If you want to time infection it is better to get it later than sooner. We develop better treatment options from better data and that takes time. You do not want to get it when the treatment facilities are stressed.

New York City is the epicenter of the virus and also being our major media center, the coverage has obscured the much lower infection rate in much of the rest of the county. Fear and outrage generate clicks and that is the new currency in modern digital media.

For those who want to get into the weeds on the applicable statistical models you may find this interesting: https://www.youtube.com/watch?v=UJnJxFYVlFs&feature=youtu.be This somewhat clarifies how much of the lower than expected growth is from a different statistical path than the effectiveness of the shelter in place regimen.

Shelter in place and attentive hygienic practices have saved lives and would have with any flu epidemic, but it appears that is only a part of the better results we are seeing. Flexibility is essential; hospitals with low Covid-19 caseloads should not be restricted in proving care for other illnesses. Cancer and heart disease do not volunteer remission because a new virus has captured the headlines. Even routine care can mitigate advanced illnesses.

New data is valuable but still preliminary. Tradeoffs remain and there is risk in any decision. Sound decisions do not always yield good results. Openness and flexibility are essential.

I hope we can objectively assess this pandemic as it passes to be better prepared for the next.

I called Cox technical support last night- cable went down during The Battle of the Bastards in Game of Thrones (first world problem). The support representative was obviously working from home and had a chihuahua and a poodle barking in the background. I found it amusing; it made the interaction more human than normal.

Health Market Realities

I just completed reading Ensuring America’s Health Care by Christy Ford Chapin about the history of the development if America’s health care system. The book is very detailed about the evolution from AMA control to an insurance company model that is interlaced with decades of legislative initiatives. It is a big hot mess with perversions of incentives, market intrusions, and political opportunism. If you do not have the inclination to dive into this history I recommend an interview with the author by Russ Roberts at Econ talk here. I also recommend an interview with Kevin Smith on free market health care here, about his hospital in Oklahoma that bypasses our insurance model system and only takes cash at time of service.

To those who claim insurance is immune to market forces, I would suggest that the problem is that it is not. If a grocery store was required to get a certificate of need to open up a new store and the competitors got to make the decision what would likely happen to the price of food. What would happen if an association of grocers could determine who is allowed to sell food? What would happen to the price of your auto insurance of you filed a claim for oil changes and preventative maintenance? What happens to anything when you restrict supply and expand demand?

What happens when you believe that the government is the only choice capable of solving this extraordinary complicated problem?

One answer is in today’s Wall Street Journal, Where Do You Want to Get Cancer?

excerpt:

But the drugs require enormous investment and therefore aren’t cheap once they’re approved by the Food and Drug Administration. The United Kingdom’s National Institute for Health and Care Excellence has rejected immunotherapies because they were too expensive, though it has had to relent in some cases after patient protests.

Such government rationing and price controls on drugs are one major reason that countries with socialized medicine like the United Kingdom have lower cancer survival rates than the U.S. The age-adjusted cancer mortality rate is about 20% higher in the U.K and 10% higher in Canada and France than in the U.S. Survival rates for hard-to-treat cancers are also higher in the U.S. than in most countries with nationalized health systems.

According to a study in the journal Lancet last year, an individual diagnosed with pancreatic cancer between 2010 and 2014 had nearly twice the likelihood of surviving five years in the U.S. than in the U.K. The five-year survival rate for brain cancer in the U.S. is 36.5% compared to 27.2% in France and 26.3% in the U.K. For stomach cancer the five-year survival rate is 33.1% in the U.S. compared to 26.7% in France and 20.7% in the U.K.

Diagnostic and treatment advances in the U.S. are also accelerating. Google’s artificial intelligence can now detect breast and lung cancers with better accuracy—meaning fewer false positives and negatives—than radiologists. AI systems are also enabling researchers to identify more genetic links and to personalize treatments.

Even the report’s gloomiest news has a silver lining. Death rates for liver cancer are rising faster than for other forms of the disease, but Hepatitis C drugs could greatly reduce the incidence and have come down 80% in price since 2014. It’s also worth highlighting that the disparity in cancer death rates between blacks and whites declined to 13% in 2017 from a peak of 33% in 1993.

HKO

Do you really want the government allocating all of our health care expense?

The Nirvana Fallacy

from The Library of Economics and Liberty, How We Failed Our Economics Students and Caused Low Government Approval Ratings by Russell S. Sobel:

The “nirvana fallacy” is the logical error of comparing actual things with unrealistic, idealized alternatives. For instance, some might see a problem in the current health care system and propose that because of this, we should have a government-run health care system, based on the logic that this ideal government-run system would overcome all the problems. This tendency to idealize the outcomes of potential future government policies and programs is a persistent bias in public perception of government and in government policy-making. No wonder this leads to widespread disappointment with the actual outcomes of government!

Only through careful thought about real-world alternatives, by comparing the likely true limitations of both the private and public sectors, can good judgments about policy be made. Assuming some benevolent government will institute quick and perfect Keynesian business cycle corrections that maintain full employment, or that government provision or regulation will result in ideal outcomes in other markets, leads to unwise policy making—and to public displeasure with the outcomes of government. It even leads some young individuals into believing that an entirely government-run economic system (e.g., socialism) controlled by democracy would magically work better than our current economic system to solve all our problems.

Replacing One Health Care Failure with Another

From The Wall Street Journal Biden’s Plan for Health is Already a Failure by Brian Blase:

Yet ObamaCare largely failed in its primary goal—to create a better market for individual health insurance. The ObamaCare exchanges are performing much worse than expected when they were launched in 2014. And this has nothing to do with the Trump administration. Rather, the law failed because of its perverse construction.

The Congressional Budget Office estimated in 2014 that there would be 25 million enrollees covered in the exchanges in 2019. The actual figure is about 10 million. People who don’t qualify for huge subsidies or who aren’t sick don’t find value from the products. Exchange enrollment has stabilized, but only because of the subsidies. The number of unsubsidized enrollees in the individual market dropped from 9.4 million to 5.2 million between 2015 and 2018.

HKO

“The first lesson of economics is scarcity: There is never enough of anything to satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics.”- Thomas Sowell

My experience buying individual insurance for my wife, Debbie, reflects the incredible damage the ACA did to the individual market. By defying the relationship of health care to basic economics we passed a bill that defied basic economics- the outcome was very predictable. Another example of promising a benefit without paying for it; hiding the cost in a maze of cross subsidies, mandates, proxies and obscure regulations.

During the debate we heard of 46 million uninsured. Once elected Obama spoke of 30 million uninsured. (The magic of electing the right person I guess) The real number of chronically uninsured were between 10 and 12 million, ‘ironically’ much closer to the number who actually received benefits from the ACA.

Like any government program failure is never acknowledged. Single payer would be a bigger failure.