Sinners in the Hands of an Angry Blog

From Mr. Harsanyi at Hit&Run:

The uplifting tale of the hard-boiled immigrant, dipping his or her sweaty hands into the well of the American dream, is one thing. Today we find ourselves in an unsustainable and rapidly growing welfare state. Can we afford to allow millions more to partake?

When Nobel Prize-winning libertarian economist Milton Friedman was asked about unlimited immigration in 1999, he stated that “it is one thing to have free immigration to jobs. It is another thing to have free immigration to welfare. And you cannot have both.”

I completely agree with the sentiment.  But do the facts of immigration back this up?  Immigrants across the only border that people ever talk about “guarding” are generally young and looking for a job.  It may be possibly true that they would be net recipients of welfare (i.e. get more welfare than they pay taxes on their work), but what about Medicare?  Medicare makes welfare look like pocket change — and it is a primarily generational tax transfer; that is from working young to the old.  In this case,  immigrants look less like freeloaders and more like suckers.

Given the way the demographic numbers are pointing, with the percentage of young, working Americans declining, and the percentage of old, not-working Americans increasing, we may need a ton of immigrants (who are overwhelmingly in the first category) to make this work in the long term.  I am convinced that even if immigrants are free-riding on welfare, the fact that they (and illegal immigrants moreso) are net contributors to the Medicare redistribution more than makes up for it.  If there is a program that is going to bankrupt America, it is Medicare — not welfare.  Therefore I can’t get angry about young, relatively healthy workers coming here and helping put off our financial apocalypse.

Update:

I honestly don’t care how much people want to police the border, or crack down on illegal immigrants.  I want the completely legal routes to working here to be made much wider.  I want the world to actually resemble the one the crazy build-a-wall people imagine: where the only ones trying to sneak across the border are criminals — because anyone who is just trying to get a job has an easy and low-cost method of getting in.

Conor F. has more on the “let more people in and we don’t care how you police the border” idea.

This is great stuff:

We lost.   They won.

We are:

Progressives who favor a single-payer system

Libertarians who favor HSAs

Moderate economists who favor cost control to free up money for other societal goals

They are:

Doctors

Pharmaceutical companies

Hospitals

Private prepaid health plans (for some odd reason referred to as “insurance companies”)

Medical device makers

And many other special interest groups

Minor quibble with “doctors,” as certain specialties will benefit and certain ones will not, but still, that basically covers it.  What’s most interesting (at least for me, because confirmation bias is lots of fun) is his comments on the (completely insane) idea that regular health maintenance (doctor’s visits, normal drugs) and catastrophic care (car accidents, cancer) are still being treated as the same thing:

Private prepaid health plans (for some odd reason referred to as “insurance companies”)

[...]

The way to achieve this is with a combination of HSAs and catastrophic insurance.

His “odd reason” above highlights the insanity: insurance is for low risk, high cost events.  It should not cover doctor’s visits or birth control.  This is not to say that you can’t (or shouldn’t) have a plan that pays for those things, but it is emphatically not insurance, and should be treated and regulated differently.

I also like his proposed alternative (take that, reformers who say no one else has any better ideas!):

Sometimes I think the two political extremes blew an opportunity.  Let Medicare take over catastrophic insurance for everyone, and let HSAs cover 95% of health care bills.  Then provide a subsidy to low income workers’ HSAs.  Voila, no private insurance companies.

That would work, (the vital component is the different treatment of maintenance and catastrophic healthcare) but again, at the risk of being nitpicky, I’d split the “catastrophic” care segment, by establishing some dollar amount “medicare opt-out” that you could elect to take.  That way, if you felt like you could do better on your own, you could go that route, but you’d be ineligible for medicare forever.  Oh, and no healthcare reform (well, you know, other than the one we just passed) is complete without repealing the current bias in the tax code for employer provided insurance over individual provided. Still, these are minor nitpicks.

What it comes down to is this: libertarians warned that this hallmark of progressive policy making would end up getting completely corrupted by precisely those groups progressives hate most, to great financial and political gain.  And they were right. But then, maybe I just want thousands of poor people to die, so who are you to believe?

Wait, what the hell, did people really not know this?

I’M NOT sure how the blogosphere managed to collectively miss this, but very little attention was paid to this piece last week in Slate by cardiologist Darshak Sanghavi which explained how Medicare and most private health insurers set reimbursements for different kinds of physician procedures. Okay, maybe that doesn’t sound so exciting, but it’s actually very, very weird.

It’s almost impossible to believe, but according to this article in Annals of Internal Medicine (cited by Mr Sanghavi), it appears to be true: in setting the price for a procedure, Medicare doesn’t consider how much healthier it makes the patient, any more than the old Gosplanconsidered whether anyone wanted to buy the USSR’s cruddy steel. Amazingly, private insurance companies have followed suit, basing their reimbursement rates on the same RVUs set by the AMA. The article points to the way this system has resulted in artificially high numbers of specialists and a shortage of primary-care doctors, but the problem goes deeper: this kind of pricing would obviously lead to the kinds of distortions Atul Gawande found in his celebrated New Yorker article this summer, on why America spends so much on health care.

I am honestly not trying to sound condescending here, because the reason I know this is not because I’m smart or well-read, it’s because my wife told me — but I just kind of assumed it was one of the major features of the healthcare debate that people would know about.  Also, the part is bold is extremely important.  It is not “amazing” that private insurers do this, it’s pretty obvious that they have to.  If you reimburse for less than Medicare, doctors will (over time) just bill Medicare for the procedure.  If you reimburse for more, doctors will bill you for it, and you’ll pay out much more than your competitors.  And unless the price-setting geniuses at Medicare and the AMA pick the precisely right price (ha ha, especially since they have a financial incentive to go high) then there’s going to be some problems.

And the source of this cushy, Soviet-style pricing scheme appears to be the monopoly power of America’s doctors’ association. Now, this is the first time I’ve ever read about this system, and it’s possible that I’m completely missing something here. But it seems to me that if anyone is really worried about socialism in America’s health-care system, they should be taking a close look at the AMA’s RVU Update Committee and why it is allowed to set the wages that doctors are paid.

Well, duh — this one of the key features of why I’m (and I assumed lots of other people) are against the healthcare reform being proposed.  The more government control of this sector, the more important that pricing scheme becomes, and the more incentive doctors have to lobby to inflate it, and then everyone’s costs go up, including the people on private plans.  I thought the “Medicare determining private insurance reimbursement rates” concept was front and center in the healthcare debate.  I guess if it’s not, it should be.  It’s a prime example of how the level of government involvement in healthcare is already making the system worse. (more…)

Tyler Cowen believes that the government will use a consumption tax to make up for social security and Medicare shortfalls:

Today’s report is this:

“The financial outlook for Medicare and Social Security has significantly worsened, as the bad economy and mounting job losses have pushed both programs years closer to insolvency, according to a grim report issued Tuesday by the Obama administration.”

Maybe you once argued that “Social Security is fine,” but dollars are fungible and the budget must be judged as a whole.  The consumption tax is coming, I am sorry to say.

While I think he’s definitely right that taxes will increase, I think they will not increase as much as is actually necessary to cover these programs.  This is because I think politicians will take what they perceive to be the easier way out — a combination of excluding high-cost individuals from eligibility for healthcare as well as laws that seek to prevent unhealthy actions.

As an example, take many of the nanny-state laws we have now: seatbelts, bicycle helmets, banning of fatty foods.  The rationale for limiting behavior that only harms oneself is that we all bear the burden of your injuries — and if we increase the scope of our current national healthcare programs, this will only enhance these arguments.  An alternative choice the government could have made would’ve been: “Well, we don’t want to restrict the freedoms of our citizens to choose to not wear seatbelts, so instead we’ll just increase taxes to pay for the medical care they will inevitably require” — which is basically the decision that Cowen is describing.  I can’t think of any time this actually happened.  The government always chose the path of punishing or restricting the actions of  ”bad-decision-makers” instead of socializing the costs to the “good” people.

So my guess is that as national healthcare costs rise to unsustainable amounts, the government will exclude high cost (and assuredly politically powerless) individuals from coverage (drug users would be the logical start) as well as outlaw high cost activities (not exercising, eating anything listed at thisiswhyyourefat.com).  Eventually these two policies will have a certain amount of synergy —  if you’re convicted of any high-cost-prevention laws, you get booted from the healthcare system.