THCB

Controlling the Medicare Budget – Two Infeasible Proposals

How to slow Medicare’s escalating costs has been the big health care policy issue this month, with Republicans and Democrats offering competing proposals, each part of broader plans for reducing the federal deficit—projected to be $1.5 trillion this year, with the government borrowing 40 cents for every dollar it spends.

Unfortunately, neither the Medicare proposal of Representative Paul Ryan’s House Budget Committee, nor that offered in response by President Obama, can be considered realistic.

Both proposals do have some merits. Representative Ryan’s plan for switching Medicare to a quasi-voucher premium support program in which beneficiaries would pay part of the premium for their choice of health plan could make seniors more cost conscious and introduce more competition among insurers. President Obama’s proposed strengthening of the Independent Payment Advisory Board provision of the ACA by lowering the trigger point for IPAB action would force further efforts to reduce costs, while doing much to remove Medicare policy from lobbyist-vulnerable political considerations. Both, if implemented, would effectively guarantee that federal Medicare expenditures would drop dramatically from current projections.

Neither, however, has any chance of enactment. The Congressional Budget Office’s projection of the average 65-year-old paying more than two-thirds of the cost of Medicare coverage by 2030—and more than twice as much as under the present program—almost certainly dooms Representative Ryan’s proposal. (The CBO’s assumption of the continuation of the differential between traditional Medicare and insurers’ equivalent offerings can be questioned, but it’s the forecast of the unfortunate 65-year-old’s 68 percent share of the tab that will resonate for seniors, their lobbyists, and their political supporters.)

President Obama’s proposal is just as unlikely to succeed. Senior Republicans were scathing in their criticisms of the original IPAB provision, as further increasing bureaucratic meddling in seniors’ care, and can be assumed to be even more opposed to any strengthening of IPAB. Political considerations aside, the President’s plan faces practical problems. The ACA severely limits the scope of IPAB recommendations, specifically excluding increases in beneficiary costs, benefit restrictions, changes to eligibility criteria, or any “health care rationing.” Since the ACA also forbids most targeting of hospital and hospice rates before 2020, the major cost-control option remaining is a severe cut in physician payments (and even that is excluded if a permanent fix to the sustainable growth rate problem is enacted), something that—even if it were politically feasible—would almost certainly lead to a wholesale exit of doctors from the program.

Both proposals suffer from another problem: each would shift costs onto Medicare beneficiaries and onto non-Medicare private sector insureds, although in slightly different ways.

Representative Ryan’s proposal would require beneficiaries to contribute to the cost of insurance coverage in excess of the government voucher value. To the extent that insurers respond to beneficiaries’ expected increased cost consciousness by squeezing provider rates, it’s likely that providers will try to recoup by increasing their charges to private sector payers.

President Obama’s proposal would require IPAB to impose cost reduction strategies to meet the targets prescribed in the ACA.  Whether these are simply cuts in rates or more stringent applications of “evidence-based” medical criteria, each almost certainly resulting in providers leaving Medicare, the result is likely to be many beneficiaries paying out of pocket to obtain care, and—just as for Representative Ryan’s proposal—providers increasing charges to other payers .

The two proposals have one other feature in common: they each ignore history. Representative Ryan’s plan ignores the total failure of Medicare Advantage’s insurer competition model to reduce expenditures. President Obama’s plan ignores the almost equally total failure of CMS and its predecessors to bring Medicare costs under control in any significant way, other than by reducing provider reimbursement (and anyone who believes the current proposals for Accountable Care Organizations will achieve this cost control miracle would do well to read recent critiques by Ron Klar and Jeff Goldsmith [in www.healthaffairs.org/blog]).

Roger Collier was formerly CEO of a national health care consulting firm. His experience includes the design and implementation of innovative health care programs for HMOs, health insurers, and state and federal agencies.  He is editor of Health Care REFORM UPDATE.

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  1. Nate yes where are you getting your $500 NRI

    Nate yes where are you getting your $500 MRI. I wonder if Exxon likes making 10% of $25 or $100 barrel of oil, similarly do insurance companies and brokers prefer 20% or 2% of $100 or $1000 a month health insurance? Where is the incentive to control costs? How do I as a physician cope with filing claims with 1000 insurance companies if competition is opened country wide and through the internet when I am not coping with the 100 I presently deal with, admittedly perhaps 20 account for 90% of claims and best of all Medicare is mostly just to one billing agency. I desperately want to see a monthly statement for the home health services that I sign daily! Transparency is what I seek and the public has no idea where the money is going. That means how much of my premiums goes to each provider and for what and how much goes to administrators fat salaries and stock dividends. Let me at least see what I am paying for in premiums and taxes for those whom I am supporting via CMS.

    /

  2. if the rest of this garbage is like the first couple pages its not worth the pixels its represented with.

    477 billion more calculated how? Maybe becuase no other country has 300 million people they are comparing to? Are they really comparing total spend of a nation with 300+ million to countries with 30-50 million?

    We provide Rx not available in many other nations, very very expensive drugs, another meaningless comparison.

    if you want to debate post facts not opinion graphs. You can’t take surveys across different nations on matters like this. Expections vary, people in the US wouldn’t tolerate waits that they have in Europe. A 3 day wait here would be surveyed as unaccaptable while a 3 day wait in canada would be considered excellent. Liberals and their junk science

  3. I am running for President in the 2012 elections as an Independent candidate. Here are my health care policies:

    He says Obama Care does not go far enough, and proposes a completely new healthcare plan he calls “Americare,” which will provide government healthcare for everyone from cradle to grave.

    “Americare will pay for the needs of all United States citizens and allow healthcare providers to be compensated according to their skill set. It will replace Medicare, Medicaid, and all private insurance. I believe that all private insurance companies are criminal organizations, because they make profits by delaying and denying care which could in many instances cause unnecessary deaths and suffering to people who rely on private insurance,” explained Abramson.

    Abramson wants the liquidation of all private insurance companies, moving their administrative workers into Americare jobs. He wants to offer forgiveness of all medical indebtedness for anyone with debts resulting from the previous healthcare system. He said the cost of Americare will be paid from the savings obtained through military budget cuts.

  4. “That they’re studying, working and spending money on reducing wait times ”

    Democrats have been studying, spending money, and reforming healthcare since 1965, how’s that worked out?

  5. “What are you trying to say with the links?”

    That they’re studying, working and spending money on reducing wait times – after all it’s free and there are no wait time for emergencies. As well wait times are regional and by city, so the “average” doesn’t mean much. The link to the study was to show that Canada is not just throwing money at it, they’re trying to figure out the best access/cost direction. Nate, you complain about how U.S. system is overused but then scorn Canada that attempts to control use. If impatient Canadians want an MRI so bad then they can go to the U.S. and pay cash, such as Buffalo.
    http://www.buffalomri.com/CanadianPrivatePayPatients.aspx

    Meanwhile the Canadian system costs about half the U.S. system with no co-pays and deductibles. If Canadians want their system to cost more to provide more then they only need to lobby their politicians for more tax money going to it. In the U.S. it appears lobbying for cost reduction goes on deaf ears.

    http://www.buffalomri.com/CanadianPrivatePayPatients.aspx

  6. What are you trying to say with the links? That canada has unacceptable wait times and haven’t solved the problem, they ration by denial of care via insufficient resources?

    Wouldn’t an HMO or insurer in America with these wait times be sued? A point people making the we spend twice as much complaint don’t even seem to factor in.

  7. non hospital owned is the key words these days, you can easily save 60%+ by having it done outside the hospital.

  8. “Plus, where can you get a full MRI for $500.”

    Matt M. –

    A little over a year ago, I had a brain MRI. The non-hospital owned imaging center billed $1,800 but it accepted $475 from my insurer, Highmark Blue Cross, as full payment of which I paid 20% or $95. The test was done in New York City – lower Manhattan to be precise.

    A college friend of my wife’s lives in Southwestern Ohio. An imaging center near her offers virtually any MRI to even those without insurance for $600. The imaging center at Ohio State University Medical Center charges 4 to 5 times as much for the same thing and actually collects close to that from some insurers. The world of healthcare really is nuts in a lot of ways.

  9. I don’t need to check google I have the cashed checks and contracts, FYI who cares what they were charged what did they pay?

  10. Aren’t you supposed to be in the insurance business? MRIs in the US don’t cost $500 anywhere. That doesn’t even cover the radiologist fee (which was included in the France MRI).

    Try Google: “I recently had a lumbar spine MRI with and without contrast. My insurance company was charged $4,307 plus an additional $700+ for the radiologist’s fee.

  11. really? Just becuase someone hasn’t read you a story about their financial problems doesn’t mean they aren’t happening.

    “In June 2010, the French government announced that it was to cut healthcare spending by EUR600mn (US$826mn) in 2010 in order to rein in mounting budget deficits. Cost containment measures to be employed included reducing drug prices by EUR100mn (US$138mn), a EUR180mn (US$247mn) freeze in government support to hospitals and retirement homes, and the freezing of EUR105mn (US$145mn) of funds allocated to the upgrade of health facilities. ”

    “The U.S., the U.K., France and Germany must control spending on pensions and health care to keep their debt burdens stable over the long term, Moody’s Investors Service said.”

    “France and Germany recorded significant debt increases, but have on balance moved toward deficit reduction, France less aggressively so than Germany,” Moody’s said.

    And no the French aren’t volunterring to pay higher taxes to cover it;

    “New York, N.Y. – July 14, 2010 – A new Financial Times/Harris Poll finds that when it comes to reducing deficits and public debts, cutting spending is definitely preferred to raising taxes by adults in the five largest European countries and the United States. Half of French adults (50%), just over two in five Italians (45%), Spaniards (44%) and Germans (41%), and just under two in five Americans (37%) and one-quarter of Britons (25%) all would prefer spending cuts to paying higher taxes. Around two in five in each of the six countries (between 37% and 46%) would prefer a mixture of the two, with spending cuts bearing the bigger part of the burden.”

    France is preparing new spending cuts to help deliver the €100bn in savings needed to … to local authorities; and slower growth in healthcare spending.

    Seems French are having to cut back all around

    “This number far exceeds the percentage of people who have reduced medical spending in other countries, including 7.6 percent in Britain, 5.3 percent in Canada, 10.3 percent in Germany, and 12 percent in France.”

  12. I had a friend who went skiing in France. Fell and needed an MRI. Had the MRI immediately. Cost was $250 (as an uninsured out of country visitor it was paid in cash). (She’s doing fine now.)
    This illustrates just how corrupt our US health care system is… grossly overpriced services… and how France does a much better job of controlling cost and providing access.

  13. unless they go the NHS or Canada route and you wait weeks until the few machines have free time or you just don’t get the MRI you need.

    Couple years old but;

    “The median wait for an MRI across Canada was 10.1 weeks. Patients in Ontario experienced the shortest wait for an MRI (7.8 weeks), while Newfoundland and Labrador residents waited longest (20.0 weeks).”

    Is this where we are headed?

    “Derby’s hospitals trust is earning £100,000 a year from doing MRI scans for fee-paying patients despite year-long waiting lists for its NHS patients who face waits of up to two years for magnetic resonance imaging scans. Now we have discovered the MRI scanner, based at Derbyshire Royal Infirmary, is used on a Saturday for “three or four” scans on patients who are charged £300 to £600 each, amounting to £100,000 a year.”

    2 year wait would answer a lot of medical questions at no cost, if you still need the MRI after that long obviously something is wrong.

  14. Margalit –

    If in the future, the PCP is a salaried employee of an ACO and the ACO is paid a risk adjusted capitated rate to provide all appropriate care for a patient population, then the current fee for service based arrangement will become irrelevant. Most hospitals will always need to have radiology equipment, including MRI machines, onsite to handle inpatients and emergencies. If there is additional capacity to handle outpatient procedures, the marginal costs to perform those tests will be low. If there is a need for additional capacity to handle the non-emergency cases and a non-hospital or non-ACO owned imaging center can do the job at lower cost, the ACO will have an economic incentive to outsource those tests. Moving away from fee for service would completely change the incentive structure and I would expect ACO’s to respond accordingly in both how they organize themselves and how they evaluate and review their salaried providers with respect to care quality, utilization of resources and patient satisfaction.

  15. In the new order of employed PCPs, they will have to refer to the facilities of their employer and it won’t be the free standing center, no matter how good and how cheap it is.
    Also if MLRs are fixed, insurers will have even less financial incentive to reduce spending. And I’m not saying that the solution is to let insurers pocket the difference.

  16. 3-4 years ago imaging centers were all the rage for investors, every issue of forbes and fortune had adds.

    How do we get that radiology group who already has a relationship with the hospital? Why after decades working with the hospital would they switch to us?

    How much are you and I going to want to make on our money and how quickly are we looking for a return? A doctor who can self refer has much less risk then you and I would.

    Not to say it can’t and doesn’t work but its not a clear cut solution and wont guarantee better results then provider owned.

    The population managed by PCPs is pretty small, 20% ish and concentrated on the coast. What might work for the coast probably wont work in the middle.

    Investor owned imaging centers also are prone to excessive use, so you still need pre-auth or some sort of management. The common theme no matter who owns it is to manage medical necessity. Why waste time on ownership, just do a good job overseeing usage

  17. Nate –

    I appreciate your comment about having several ways to combat excessive utilization but it’s hard to create competition where none exists. It is well known, though, that doctors who own their own imaging centers order more tests than those that don’t. I remember seeing a McKinsey study a couple of years back that claimed utilization between two and eight times higher than doctors who don’t own their own equipment. However, I think others besides doctors could open and operate a stand alone imaging center.

    Suppose you and I organized a group of investors to put up the capital for such a center. We buy the equipment and hire the appropriate techs, administrative people and anyone else we might need to staff the facility. We establish a relationship with a nearby radiology group to interpret the images and deliver a report to the referring doctor. We advertise that our center will do any MRI that takes 30 minutes or less of machine time for $600 while those that take longer will be billed at a higher rate of, say, $300 for each additional 15 minutes or fraction thereof.

    Insurers with tiered networks could encourage members to come to our center by offering a lower co-payment than they would pay if they go to the local hospital owned facility. The difference in co-pay could be substantial – as much as $400 or $500 which at least one insurance plan in the Boston area is doing. The bottom line is that if there is an opportunity to disrupt the imaging market by offering comparable or better quality and service for a lower price, there should be a market for it, at least if insurance plans are structured to encourage their members to take advantage of it and/or make them pay a penalty if they don’t. Meanwhile, if PCP’s were being paid on a capitated basis or at least having their referral utilization tracked carefully and evaluated vs. their peers, they would have a clear incentive to send their patients to us as well as long as we offered good quality and service using up to date equipment, well trained techs and affordable prices.

  18. I never care for his studies, they always seem to lack applicability. For example look at how linear his line is. That makes no sense at all. As disposable income increases the line should shoot up. If your making 15K a year after you put a roof over your head and feed the family you have no money to spend. if you make 150,000 a year once you pay the necessities then you can consume all sorts of extra care, even care of poor value. If you take an extra week of vacation or spend $3000 on a wellness check up at Mayo it doesn’t matter. The greater our wealth the more I would expect we spend on protecting our health, where this study claims we spend 41% more then expected. Statistically it might be set up correctly but it lacks any recognition of human nature.

    If you go back to the study the incidental economist based his post on its just as bad. Based on the numbers they use its accurate but lacks any perspective or applicablity. For example they slightly address cosmetic dentistry, and in passing cosmetic care in general. I don’t see any adjustments to their numbers for these facts. If your discussing broad spending then fine leave it in, but once you start discussing the value or expected care from one country to the other this needs factored in. Are we really going to tare down the US healthcare system becuase we get more boob jobs? How does IE’s linear line not show any expected increase in cost once people are able to afford cosmetic care?

  19. generically I would respond what effect does the doctor working for the hospital that owns the facilities have on utilization, I would expect that to drive up cost. I know an outpatient MRI cost $1500 to $1800 when done at the hospital. I can direct a member to a freestanding MRI center for $600 or less. If I outlaw doctors owning MRI centers then who will put up the money to build a free standing center to compete with the hospital? I rather pay for an extra MRI or two at $600 then pay $1800 for every MRI.

    Further I can require pre-auth on MRIs and combat excessive referrals. I can implement cost sharing so the member questions the need for the MRI. I can pay for second opinions to assist the member in deciding if they need an MRI. I have numerous ways to combat excessive utilization, I don’t have any way to create competition when none exist.

  20. You write:

    “… program in which beneficiaries would pay part of the premium for their choice of health plan could make seniors more cost conscious and introduce more competition among insurers.”

    Why do all you politicians and consultants write things like the sentence above that imply that Medicare beneficiaries do not currently pay part of the premium for their choice of health plan today? Everyone pays a Part B premium. In Massachusetts at least (and I think in all other states), after paying the Part B premium about half of seniors pay an additional premium for private Medigap insurance or for Medicare Part C. The other half of seniors in Massachusetts apply for welfare to pay for their Medigap or Part C supplement (and some even get welfare to pay for their Part B).

  21. For those that don’t know

    http://www.youtube.com/watch?v=ssl5yb7FewA

    One West Bank paid the FDIC 70 percent of the principal balance of all current residential loans

    One West Bank paid the FDIC 58 percent of the principal balance of all HELOC’s (Home Equity Lines of Credit)

    The FDIC agreed to cover 80 – 95 percent of One West’s loss on an Indymac loan as a result of a short sale or foreclosure.

    The kicker is, according to the video, is that the “loss” is computed based upon the original loan amount and not the amount One West paid for the loan.

    On the video the hosts give an example of an “actual scenario” showing how the deal worked, below is a recap:

    One West Bank approved a short-sale of $241,000 on one of the Indymac loans it purchased from the FDIC (the total balance owed by the borrower at the time was $485,200).

    Based upon the terms of the loss sharing agreement, One West “lost” $244,200 on this transaction, 80 percent of which ($195,360) was paid to One West by the FDIC.

    So, One West received $241,000 from the short sale and $195,360 from the FDIC for a total of $436,360 on a loan they bought from the FDIC for $334,600, thereby resulting in a profit of $101,760 on the loan to One West.

    One last kicker, the video claims, in addition to making over $100,000 on the loan, since the house was sold for less than what the borrower owed, One West also made the borrower sign a promissory note for $75,000 of the short-fall.

    Wonder why One West Bank never did modifications and instead made sure people always lost their home….oh thats right Washinton paid them to take homes away.

  22. If your going to discuss the benefactors of the housing boom I think you underblamed local and state government and to some extent federal. They were addicted to the taxes. Don’t forget every time a house sells you have large tax payments made. At the local level you had recording fees and taxes as well. The inflated values also made mortgage brokers, real estate agents and others more money then they ever would have made otherwise which lead to taxable incomes they would never make otherwise.

    One reason the recovery is so slow is that income will probably never be replaced. Most of those people will never make money like that again any time in their life.

    “As for basing rental income to achieve ROI in single family, it’s just not there without rising property values”

    How many rental homes do you own Peter? That comment is BS in every state I work or know people that work. I’ll use some terms I’m sure you don’t understand but that just proves the point.

    In NV, CA, AZ, FL you can buy below replacement cost.

    In those 4 states plus OK, the midwest and New England the rental market is better then it has been for a long time, for the past 10 years ANYONE with a good job and stability was buying houses not renting, there is a better crop of renters now then in a long time.

    I have not seen a single market in the US except maybe DC, NYC, and some select cities where you can’t rent for 25-50% profit. In most cities cash investors are scooping up houses and making a killing.

    To add to Barry’s list of how the government made this worst.

    In the start of the crisis they outlawed Negative Am, ARMs, and the loans they blamed for the mess. Loans are like guns, loans don’t cause foreclosure using them wrong does. There was plenty of experienced investors who knew what they were doing that had the rug pulled out from under them and forced into foreclosure becuase the government killed the marlet they needed to ride things out.

    Capping the number of properities, before you could get loans for 10 plus properities. Then it was 4 then 2 then they started raising it again. First thing this did was anyone with more then 4 houses was F’d. If you had an arm or a bad loan you were stuck there was no way to refinance becuase the government once again killed the market. If an investor lost one house because of this then they were not eligibile to refinance any others. Instead of no houses being foreclosed and the professional investor riding it out entire portfolios were foreclosed. Worst case maybe they needed to lose 1-2 houses but thanks to government and all their brillance they lost all 10. Obviously the more houses on the market the bigger and deeper the problem gets.

    The above rule in the start of the crisis also locked ou the professional buyers while leaving it open for the small time buyers who ran in to soon and didn’t have the resources to weather the further decline. That is how you had the same house being foreclosed 3-4 times, people where chasing bottom.

    Like the great depression 50-75 years from now scholars and historians will look back on this and ask what the hell was Washington thinking. Every decision they made they got wrong. Politicians like they always do turned what would have been a 6-12 month slow patch into an all out 3+ year disaster.

    Their friends and Contributors got rich though, I assume you heard how Soros makes money from the taxpayor everytime he forecloses on someone right?

  23. “Barry, are you blaming HAMP?”

    Peter – I’m placing a lot of the blame for slowing the housing recovery on modification efforts generally. In 1982, we had a severe recession when then Federal Reserve Chairman, Paul Volcker, raised interest rates sharply to break the back of inflation. Mortgage rates were well into the double digits and the unemployment rate peaked at over 10%. Yet, when the economy started to recover, the recovery was sharp and fast and was led by housing.

    If you are an investor in single family homes and are buying either for resale or to rent them out, then you know more about that aspect of the market than I do because I never invested that way. I’m a stock and bond market guy. While I’ve invested in REIT’s and own a couple of them today, my single family housing investing experience is limited to my primary residence which I’ve lived in the for the last 38 years.

  24. “However, it’s the federal government’s various efforts to force banks into mortgage modification experiments rather than just foreclose and move on that is not allowing the housing market to clear.”

    Barry, are you blaming HAMP?

    As for basing rental income to achieve ROI in single family, it’s just not there without rising property values (unless you’re into the slum lord market), you’ll need to be in this for the long haul and hope that rental deterioration (declining value) is compensated for fast enough by rising values based on disposable income. Multi-family rental is a different business.

  25. Peter –

    There are two issues embedded in your last comment – what caused the housing crisis and what do we do about it now?

    With respect to the cause, there is plenty of blame to go around. The two fundamental mistakes made by all parties were (1) they assumed house prices would continue to increase pretty much indefinitely and (2) If they did decline, it would only happen in a few places, not everywhere at once.

    Banks, of course, made lots of money from fees and interest rate spreads as they made more loans. Mortgage brokers, many with little education, made far more money than they could make anywhere else. Wall Street investment banks profited handsomely from securitizing mortgage loans. Individual and institutional investors were greedy for the higher returns than they could have earned on plain vanilla Treasury securities while rating agencies created the impression that these securities were safer than they turned out to be. The government pushed Fannie Mae and Freddie Mac to lower their lending standards in order to encourage broader home ownership. Greedy individuals bought more house than they could afford and then tapped the equity for personal consumption expenditures when prices rose. Real estate investors thought they could make easy money by flipping houses to a greater fool. When the music stopped, they all got burned and took the broader economy down with them.

    After the meltdown, the issue became what do we do now? All the efforts at mortgage modification have been largely unsuccessful. A high percentage of those who received a modification defaulted again in a short time. The majority of foreclosures were concentrated in just four states – CA, NV, AZ and FL. One more, MI, was hurt more by the collapse of the auto industry. Banks can’t easily negotiate rents or reduced payments to reflect current values because if they did it for those who defaulted, the much larger number of people who are still paying and can afford to pay will want a similar deal. Many banks are allowing non-payers to stay in their homes for the time being because at least the house is maintained rather than deteriorate if vacant for a long time. By the way, the robo signing of documents, while unfortunate, was due to the huge surge in transactions that needed to be processed. This is more of a form over substance issue due to a lack of personnel to handle the sudden increase in paperwork but hardly any homeowners were wrongly foreclosed on. Virtually all of them did actually default. The pace of the foreclosure process varies by region, by the capital strength of the banks in those areas and by local regulations that determine how cumbersome or streamlined the foreclosure process is. However, it’s the federal government’s various efforts to force banks into mortgage modification experiments rather than just foreclose and move on that is not allowing the housing market to clear.

    Finally, as for determining value, if you’re a real estate investor who buys residential properties to rent out as opposed to resell, if you have a good feel for what the property will command as a rental and what the expenses are for property taxes and upkeep, it should be pretty easy to determine what you’re willing to pay to achieve your target rate of return. Indeed, in areas with lots of foreclosures, especially CA, a large a number of homes are being sold for cash to private investors. Compared to the issues related to healthcare, housing is relatively straightforward.

  26. “Unfortunately, we don’t. In the current environment, government has the housing market so fouled up; it’s not being allowed to clear. That could be fixed by letting mortgage foreclosures move ahead and let the banks sell the homes or rent them out.”

    Barry, I agree that the housing ball and chain is dragging the economy, but don’t say government “fouled it up”. Don’t forget that the housing fiasco is what drove the market in the first place. When I saw people re-mortgaging their homes to buy cars and vacations, and appraisers conspiring with RE agents and lenders to inflate value, I knew it would not take long for it to unravel, even not knowing the securitizing lies of the Wall Street investment houses. As for foreclosures that is a continuing monster with not enough lender reserves set aside for it. Don’t forget that the banks were moving foreclosures through but they were doing it illegally largely by creating non-existent title documents with forged signatures, that in their hast to make money (at reduced tax rates), they did not have legal title in the first place because they never had the documents. The states’ attorneys-general are now investigating lender foreclosure fraud (not to mention all the other fraud they’re not investigating). Lenders are refusing to re-negotiate with borrowers and keep the home occupied thereby generating income, or at least negotiating to rent the home to the people they want to foreclose on. I drive around and see all sorts of vacant foreclosed homes not being maintained that lenders are clinging to perceived value rather than take their lumps for bad investment decisions and reduce the price to move the property. Home value (present & future) is now largely unknown for many investors (which includes me), or at least it’s unstable, and buyers need to be extremely careful about the price they pay, who the appraiser works for, and how honest they are. On REO properties the appraiser works for the bank and will appraise the property to whatever the bank wants – the fraud continues. On a larger scale if broad based disposable income is not “floated” with wealthy tax cuts then people are going to get it back from somewhere – right now housing value is one of places seen as a way to even things out. If we could also get healthcare costs down or stabilized then that would generate more disposable income to help other sectors of the economy recover and expand. As Roger Collier points out way back at the beginning of this discussion both parties are not being realistic about health cost. So, what will happen is we’ll have to wait for a collapse to shake it all out, just like the housing market was left to fester because everyone was making so much money they buried their heads wanting to believe it would go on forever.

  27. as long as your GDP is growing everythng is fine? Interesting measure, ignore the riots and deaths and pretend the debt isn’t an issue as long as GDP grows all is good. If you borrow 1 billion and spend it that would increase your GDP by at least 1 billion if not 7 billion to 20 billion. By that logic mark we should just borrow 10 trillion and blow it all in one year and watch our GDP explode….and everything in the world would be good.

  28. Nate, Nate, Nate…
    You really should make at least some effort to gather some actual facts before you go off spouting irrelevant anecdotal “evidence”.

    The real US GDP annual growth over the past three years has been 1.46%. All of these countries had higher growth over the past three years:
    Hungary
    Canada
    United Kingdom
    Sweden
    Belgium
    Germany
    Norway
    Ireland
    Spain
    Switzerland
    Netherlands
    Austria
    Australia
    Mexico
    Finland
    Greece
    Iceland
    Luxembourg
    Turkey
    Korea
    Chile
    Estonia
    South Africa
    Israel
    Brazil
    Czech Republic
    Slovenia
    Indonesia
    Poland
    Russian Federation
    Slovak Republic
    India
    China

    Most of these countries have significantly higher tax burdens than the US. I don’t think there is any relation between tax burden and economic growth but if you want to establish a correlation, I think it would point to high taxes equal high growth.

  29. Margalit –

    If we ever reach a bipartisan agreement to deal with our long term debt and spending issues, I have absolutely no doubt that the package will include a revenue component. We will see higher taxes for the wealthy and, most likely, the middle class as well. What I object to is Democrats, led by President Obama, trying to suggest that if we just raise taxes on the rich, by letting the 2001 tax cuts expire, the middle class and the elderly won’t have to make any sacrifices. There just aren’t enough rich people to square that circle and to suggest otherwise is pure demagoguery. If taxes are to go up for higher income people, I prefer to do it in a way that does the least economic harm. That’s why I prefer a broader base and lower rates or, at minimum, a broader base with current rates. I get the impression that liberals would like a broader base and higher rates. If capital gains rates were raised to 25%, which was the level that prevailed in the 1950’s and 1960’s, they would be in line with Germany’s. If they went to 28%, which is where they were in the late 1980’s when the economy performed fine, that would be OK with me as well.

    I’ve met numerous economic experts over the years from both political parties, mainly at Washington conferences for investors that I’ve attended. I asked quite a few of them how high federal taxes would have to rise as a percentage of GDP before it clearly hurt the economy’s ability to grow over the long term. None could give a definitive answer. Since there are numerous factors that affect economic performance, it’s impossible to isolate the impact from taxes alone. Personally, I think there is probably some room for taxes to increase without hurting long term growth potential. However, some taxes do more economic harm than others. The worst are high marginal income tax rates. I think the Simpson-Bowles Commission plan had taxes gradually rising toward 21% of GDP from the post World War II average of about 18%. If it were coupled with substantive and credible structural changes to Social Security, Medicare and Medicaid and defense spending declines as the wars wind down, we can probably dig ourselves out of the hole we’re in. A national ID card program, like the 9/11 Commission recommended, could also help to reduce fraud in social programs. People who apply for benefits under these programs should at least be prepared to prove that they are who they say they are. If, in addition, we rein in pension and healthcare benefits for state and local unionized workers and retirees, that would further enhance our fiscal credibility and boost the confidence of investors, both foreign and domestic.

  30. “You thesis” ? Your Thesis? I never saw the point of such pettyness, just doesn’t do anything for me.

    It is not my thesis, its an observation of history.

    ” tax revenues are much higher (40% – 50%) and that these countries are doing just fine. ”

    These countries doing fine, those would be countries like Greese, Portugal, Ireland, Spain? I also seem to recall some French austerity riots recently, did you not hear about those? Actually I can’t think of a single country besides Germany that is doing fine, who did you have in mind? Even Germany undertoom their biggest Austerity plan since WW2.

    “Some benefits have already been reduced – including jobless benefits and health care. Plus, the retirement age has been raised and many say it will continue to go up. ”

    “Among the measures agreed were a plan to slash 30bn euros from the welfare budget, including a cut in subsidies to parents who stay at home.

    Up to 15,000 government jobs could be cut over four years,”

    How is history wrong?

  31. “I believe these magnates and these corporations have a debt to pay and an investment to make.”

    This is usually an either or and sums up the difference between political parties. If you over tax them they don’t have money to invest.

    http://www.youtube.com/watch?v=661pi6K-8WQ&feature=player_embedded

    We can take all their wealth and pay for one year of Obama’s spending or we can make it attractive for them to invest, and everyone benefits long term. History has shown low tax rates creates higher tax revenue, that is what we need to be doing to get out of this problem not increasing rates.

  32. Mark –

    I think the typical taxpayer cares more about the percentage of income he or she pays in taxes of all types rather than the percentage of GDP the country collects in taxes for all levels of government combined. Income is the cash flow from which people pay their living expenses whether the income comes from wages, investment income, pensions or government transfer payments.

    I did a little research on Germany to get a flavor for the overall tax burden there. Here’s what I found.

    1. Income Taxes – The first roundly €16,000 (for a married couple) are not subject to tax. Rates then start at 14% and scale up to 42% at about €106,000 Euros. The top marginal rate is 45% which kicks in at €500,000. Capital gains and dividends are taxed at a maximum rate of 25%.

    2. Solidarity Tax – After a modest exemption, this tax is 5.5% of the income tax owed.

    3. VAT – The rate is 19% on most goods and services to which the tax applies. There is a 7% rate for certain food, transportation expenses, books and magazines.

    4. Health Insurance – The employer nominally pays 8% and the employee pays 7% on wages up to €43,000. The maximum premium is €540 per month or about $9,400 per year at current exchange rates. Family members are covered for this price.

    5. Pensions – For those who participate in the State Pension Plan, the required contribution is 19.5% of salary split evenly between the employee and employer. For company plans, employees contribute anywhere from 3% to 15% of salary with the employer contributing a comparable amount.

    6. Property Taxes – These are levied at the local level like they are in the U.S.

    The bottom line is that even middle class people can easily pay 50% of their income in taxes of one sort or another. They are willing to do it because they believe in the concept of solidarity and generally think they are getting adequate value for the taxes they pay. While I don’t know, I suspect that the U.S. may have bigger problems with healthcare fraud and general gaming of the system in the other entitlement programs. I also don’t know how big the underground economy is in the U.S. vs. Germany. At the end of the day, if middle class American wage earners in the above ground economy were offered the chance to incur the same total tax burden that Germans of comparable income pay in exchange for the same set of benefits, I doubt that there would be anywhere close to a majority willing to sign up for it. That’s just my opinion, of course.

  33. “Mark did you even read the graff” (sic)

    My Dear Nate,
    Yes, I did read the graff (sic). Did you read my post?
    You thesis is tax revenues can’t possibly go over 20% because “people would stop working (and I guess now a Morgansternian assertion that they can’t go over 20% because they never have gone over 20%).
    If you had read my post, I pointed out that in all other developed countries, tax revenues are much higher (40% – 50%) and that these countries are doing just fine. People have not stopped working and they enjoy a wide range of social benefits because of the high taxes.

    If you take Germany as an example, they have 40% of GDP as tax revenue (twice that of the US) and they have a thriving economy (recent growth greater than the US), better health indicators than the US, and an extensive social safety net to protect workers. They have strong unions, long vacations, generous health benefits (everyone receives a fully paid month long spa visit annually). And here’s the kicker, they are internationally competitive. They export more than the US (and until recently, they exported more than China) so this extensive social welfare system is clearly good for business.

    Your thesis is clearly wrong.

    Do you have any developed country examples where people have stopped working because of high taxes?

  34. Barry,
    I do agree that there are two external factors which are causing Peter’s boats to descend in developed countries. The aging of populations, or global peace, is one and the “flattening” of the earth is another. Neither one of these things is a bad thing, and both should have been anticipated.
    The question has become how do we, or how should we, react to these changes. There will be major changes in power and influence in the world as a result of these changes, and I for one, would like to see this country stay on top in the emerging world order.
    I don’t think we can accomplish that if we tear each other to pieces over how we distribute the smaller bone. Perhaps this is a time when in the interest of everybody, those who have lots of bones stashed away from the old times, should at least step aside and let everybody else eat. If socialism means solidarity, I think we need a little bit of that right now, just to help us as a country get over a very large hump.
    Those who became wealthy in this country, could not have done so without the millions who supported their enterprise, but did not amass wealth in the process, and without the unique sociopolitical system in the US. There is no other place where they could have accomplished what they accomplished here. Google could not have been born in Europe, and it didn’t. So now they have a choice: continue supporting the American way, so future generations of Googles can be born, or take whatever money they managed to make and run from the sinking ship, like any deposed dictator in a third world country.
    I believe these magnates and these corporations have a debt to pay and an investment to make. I think Americans have shown that they will support American corporations during hard times, and I think this commitment should be reciprocated. And this means that corporations and lucky individuals have to invest in the human and social infrastructure without which they will fail. I don’t think this is socialism. I think this is long term financial planning.

  35. Mark did you even read the graff or you just trying to act like an idiot? Look at the historical graph;

    ” (and there is no evidence that it would apply in the US). ”

    Its a fact that in the last 70 years they have not surpassed 20% no matter the tax rates, what part of that simple statement don’t you follow?

  36. ? If the state owns a large portion of the company doesn’t that sort of make it state owned?

    “As of 3 July 2007 41.63% of EADS stock is publicly traded on six European stock exchanges, while the remaining 58.37% is owned by a “Contractural Partnership”.[32] The latter is owned by SOGEADE (27.38%), Daimler AG (22.41%), SEPI (5.46%) and Dubai Holding (3.12%).[33] SOGEADE is owned by the French State and Lagardère, while SEPI is a Spanish state holding company. France also owns 0.06% of publicly traded stock”

    We have the French State, Spanish State, and Dubai. Last I checked the US didn’t own any of boeing and until this week when the NLRB told them where to put a second line wasn’t involved in managing it as well. Maybe you should try the real world of facts?

  37. Peter –

    I think the best way to lift the current boats is to grow the economy and the best way to lift future boats is to ensure that kids get a good education. If we had a surefire way to grow the economy that virtually everyone agreed with, we would implement it. Unfortunately, we don’t. In the current environment, government has the housing market so fouled up; it’s not being allowed to clear. That could be fixed by letting mortgage foreclosures move ahead and let the banks sell the homes or rent them out. Second, a bipartisan agreement that made credible progress toward bringing the long term federal deficit under control, would be viewed very positively by both the equity and fixed income markets, I think.

    I don’t see the rich asking for another tax cut. I seem them opposed to letting the tax rates that have been in place since 2001 expire and revert back to what they were when Clinton left office. Broadening the tax base and lowering the top rate to 25% as Paul Ryan proposed would not be a tax cut for most of the very rich but would be a tax increase instead. Most very wealthy people derive the bulk of their income from capital gains and dividends, currently taxed at a 15% rate. Also, hedge fund moguls currently pay only a 15% rate on their “carried interest” which is the percentage of profits, when there are profits, they earn as part of their fee structure for managing the fund. Personally, I think the tax treatment of carried interest is more outrageous than anything else in the tax code and it should be taxed as ordinary income pure and simple even without base broadening.

    Finally, while it hasn’t been mentioned specifically in this thread, I want to say a word about CEO compensation. While I think CEO compensation at large U.S. companies is generally way more generous than it needs to be and it annoys many people who view it as both unfair and unjustified, two points need to be noted. First, the bulk of the compensation is in the form of stock options and restricted stock awards. These are not paid for by purchasers of the company’s products. They are paid for by shareholders in the form of earnings dilution caused by the increase in shares outstanding when the awards are paid out. Second, it doesn’t affect our lives in any meaningful way. By contrast, if hundreds of thousands of teachers and police officers are paid 30%-50% more than necessary to attract and hold qualified people, it raises our state and local tax burden and/or crowds out other needed and worthwhile priorities. At the federal level, if too many healthcare providers defraud Medicare and Medicaid and too many people game entitlement programs to qualify for benefits that they really should not be eligible for, it raises our federal tax burden and/or crowds out other worthwhile priorities. So, excessive CEO compensation is annoying and makes for interesting sound bites, but it’s not nearly as important as getting government spending under control by attacking fraud and gaming of the system and, at the state level, finding ways to mitigate union greed and monopoly power.

  38. Barry, continued wealth concentration to the extent in the U.S., no matter how acquired, does not result in a good outcome. Yes, outsourcing and technical advancement/efficiencies play a big part in reducing disposable income, as well as connected investor insider knowledge in adding to the imbalance, but those actions are also supported by tax policy and tax payer bailouts, which, no matter how you cut it, is skewed by political lobbying and financial back scratching. I don’t want to make rich people poor, or stunt valid investment (I’m also an investor), but taking it all while still asking for more during a time of incredible financial suffering brought on by movers and shakers, with no social solidarity, save for your conscience saving church donation, is not going to build a strong country. It’s as if the rich know the boat is sinking so they’ll grab what they can while they can. Monarchs and despots also justify their concentration of power and finances, and this country celebrates their overthrow as pay back for myopic thinking. Don’t try to tell me the “rich” have the best interests of the country in mind when they advocate for yet another tax cut. Absent other policy changes it will not raise all boats.

  39. Margalit –

    Socialism, in the context that I used the word, means solidarity, an extensive social safety net, and a willingness, including among the middle class, to pay comparatively high taxes as a percentage of income to finance it. Even so, as European populations age, they are finding that they cannot sustain their model, especially with respect to pensions, either and are starting to scale some of these benefits back by raising the retirement age and other means.

    I think Americans, as a people, are quite generous in responding to disasters like Hurricane Katrina or the earthquakes in Haiti and Japan. They also spend a lot of money compared to Europeans supporting their religious institutions. Church and synagogue affiliation is considerably higher in the U.S. than in Europe. I think most Americans are willing to pay 30%-35% of their income in combined federal, state and local taxes. They’re not willing to pay 45%-50% or more especially when they perceive significant fraud in Medicare and Medicaid as well as lots of gaming of the system in other social programs from housing vouchers to food stamps to Pell grants to Social Security disability payments. Social Security disability payments last year were $120 billion, up about 100% from 2000.

    Finally, I think it would be helpful if liberals quantified exactly what they think is a fair share percentage of income that higher income people should pay in taxes – federal, state and local. Do they have a number in mind or is it just more than whatever they’re paying now no matter how much that is? For the record, I’ll say again that I think the current tax rate on long term capital gains and qualified dividends (both 15%) is too low and should be raised to between 25% and 28% or be subject to the Alternative Minimum Tax. Federal marginal ordinary income tax rates are high enough, in my view, especially since many of our larger, more populous states have high income and/or property taxes as well.

  40. …and the right needs to stop telling anybody that disagrees with them to go live somewhere else, or imply that they are illegal aliens and/or criminals, or at the very least plain dumb.
    I know democracy and free speech are hard for you to deal with, but you should at least make an effort…

  41. Nate,
    Are you trying to say that Airbus (a private company with large loans/subsidies from governments… similar to Boeing) makes Europe socialist? You really should get out in the real world more… try actually visiting Europe. (Irish sugar??? … really)

    Your “new rule” was that people would stop working once taxes exceeded 20% of GDP. That is clearly not true from the OECD experience (and there is no evidence that it would apply in the US). This is just conservative pipe dream/threat/fear-mongering.

    Sorry that you are also clinging to your rantings about immigrants (and have now added criminals to the mix… I guess you don’t see any difference). I have offered real world examples. You have offered nothing but speculation and fear. Do you have any data or real world experience to support your position?

  42. “I am wondering how this new rule applies to the rest of the developed world”

    seeing as how it is based on 70 years of American economic history probably not well.

    Mark how do you think English monorachy assention applies to the rest of the developed world? How does EU immigration law apply to the rest of the developed world?

  43. ” I was not aware that in France, Germany, the UK and Italy the “means of production” are publicly owned”

    its the public that owns airbus, I forgot. How about Areva? How could you not know? Wonder how much your opinions would change if you were aware of some of these facts?

    “In Western Europe there was a massive nationalization throughout the 20th century, especially after World War II to ensure Government control over natural monopolies and to some extent industry. Typical sectors included telecommunications, power, petroleum, railways, airports, airlines, public transport, health care, postal services and sometimes banks. Many large industrial corporations were also nationalized or created as Government corporations, including among many British Steel, Statoil and Irish Sugar. Starting in the late 1970s and accelerating through the 1980s and 1990s many of these corporations were privatized, though many still remain wholly or partially owned by the respective governments.”

    “there are no we that are more entitled than other we to shape such”

    Interesting, so illegal immigrants are equally entitled to shape American culture and law as citizens are? We the criminals have equal rights as the victims? Just becuase it sounds good on a bumper sticker doesn’t mean it will work in the real world. The left needs to stop living in slogans and sound bites and get serious.

  44. A) I believe Chancellor Bismarck would take issue with your classification of his health insurance system as being socialist.
    B) I was not aware that in France, Germany, the UK and Italy the “means of production” are publicly owned
    C) Our culture is what we make of it and there are no we that are more entitled than other we to shape such definition – it has dramatically changed before, and it will no doubt continue to do so

    D) “entrepreneurial, materialistic, striving and achievement oriented” need not necessarily be devoid of fairness or justice and I thought the first President Bush was all about “a kinder, and gentler nation”. Have the conservative aspirations changed since?

  45. Mark –

    I think the U.S. total tax burden of 28.2% per your source is misleadingly low because the high tax European countries channel virtually all healthcare spending through their tax systems while we only channel about half of ours through it. At about 15% of GDP for healthcare spending in the U.S. excluding out-of-pocket payments and assuming 8.5 percentage points or so covered by taxes, we need to add 6.0-6.5 percentage points to our total tax burden to have a more meaningful comparison. Beyond that, top European marginal income tax rates are not much higher than ours, at least in the larger countries. The biggest difference is that the European countries all have large value added taxes and we don’t. Those generate about 0.4 percentage point of GDP in revenue for each one percentage point of tax. European VAT rates generally range from the high teens to 25% except for Switzerland where it’s 7.6%.

    I dismiss the Scandinavian countries from any comparative analysis because all four of them together only have 23 million people and those populations are relatively homogeneous. France, Germany, the UK and Italy have all embraced socialism as a cultural and core value. They are not paragons of economic growth and opportunity for young people graduating from college and looking to find a career track job. For those who think that their societies are kinder, gentler, fairer and more just, perhaps they should move there. Our culture is what it is – more entrepreneurial, materialistic, striving and achievement oriented, and it’s not likely to change anytime soon.

  46. Interesting new rule you have here: “no matter what you raise rates to you can’t collect more then 20% of GDP”.

    I am wondering how this new rule applies to the rest of the developed world where they have rates in the range of 40% to 50% of GDP (OECD). It would seem that this “rule” is just wishful thinking. The rest of the OECD countries are doing well (even better than the US) with these tax rates. They also have better health and a better safety net to help people through the times when the world financial system crashes.

    http://en.wikipedia.org/wiki/List_of_countries_by_tax_revenue_as_percentage_of_GDP

  47. interesting graph to go with what Barry said;

    http://online.wsj.com/article/SB10001424052748704608104575217870728420184.html

    no matter what you raise rates to you can’t collect more then 20% of GDP. Which makes sense, at some point people just stop working. When you lower rates it increases GDP still generating tax receipts of close to 20%. The logical responce then, that liberals never get, is to increase GDP as much as possible to increase the value of the 20%. Wonder how much we spend on foreign oil for example…..

  48. Peter –

    I hardly know where to start but I’ll offer the following thoughts.

    1. Since the end of World War II, U.S. tax revenue averaged about 18% of GDP while the top marginal income tax rate has been all over the lot during that time.

    2. When taxes are cut or raised, it’s, of course, impossible to know what would have happened to the economy and federal revenues if no action were taken. Taxes are hardly the only factor that influences economic growth.

    3. The main reason that wealth became more concentrated in the last 30 years or so is the growth in the value of both the stock market and real assets including real estate, oil and gas, timber, etc. Since 1982, the Dow Jones Average rose from about 800 to over 12,000, for example while the general price level during that time about tripled.

    4. The main reason for wage stagnation since 1970 is globalization and technological innovation. In the manufacturing sector, for example, technology now built into machinery and equipment allows less skilled people to operate the equipment today as compared to the skilled machinists who were needed in years past. In short, many jobs have been de-skilled over the years and people in lots of countries around the world with much lower wages than ours can now do them.

    5. If you want to see a more even distribution of wealth, the fastest way to achieve it is to have a massive stock market crash followed by a depression which we could have had after the 2008 meltdown if the government and Federal Reserve took no action. Be careful what you wish for.

    6. I have no doubt that higher taxes will need to be part of any solution to the federal fiscal imbalance. I expect taxes to go for the wealthy as well as the middle class. You should realize, though, that taxes on high income wage earners, including Wall Street types, are subject to higher marginal income tax rates now than were in place following the Tax Reform Act of 1986. Most wage earners who make less than $150K or so are now paying lower marginal rates than existed then. The wealthy benefited from the reduction in the top rate on capital gains from 28% after the 1986 law to 15% today. The same is true for tax rate on qualified dividends. Those are the rates I would raise back to 28% or at least 25% if it were up to me.

    7. People who want to raise taxes on high income people because they don’t think anyone “needs” more than a few hundred thousand a year to live well don’t understand incentives. There is a reason that most spouses of high income wage earners don’t work outside the home for pay. It doesn’t pay after taxes. People have options. They can retire sooner. They can often work fewer hours (doctors, lawyers, etc.). Business owners can raise prices to pass on the cost of a higher tax burden to their customers or raise wages less than they would have otherwise or higher fewer people.

    I thought the article you cited was especially biased in its choice of end points in its graphs. It’s not reasonable to compare revenue growth from the end of a boom (2000) to a time when we’re still digging out of a severe recession and have 8.8% unemployment (2011). That’s just one small example of an obvious liberal bias throughout.

  49. The lack of understanding never ceases to amaze me. Phsyician ownership is not the problem. Hospitals are where the big money is, not imaging centers or surgicenters. There are ways to make sure doctors are not getting kick backs or violating the Stark Law.

  50. Margalit –

    I’m all for going after fraud. Two things I think CMS could do are (1) don’t pay bills quite so fast, especially if they suspect that something is amiss and (2) make their vast claims database, including payments down to the individual provider level, available to outside analysts. It’s the doctors that fiercely oppose the latter on privacy grounds and they won a court case back in 1979 that affirms their view. We need to overturn that ruling by legislation. Even if we do both of those things, though, I doubt we would save anything close to what Coburn suggests, but anything incremental would be a (small) step in the right direction.

    As for drug price negotiation, what this really means is very limited or at least tiered formularies. The VA formulary makes far fewer drugs available than most private sector formularies including Part D plans. VA beneficiaries also get their drugs from a very small network of VA facilities or by mail. Most Americans get their drugs from retail pharmacies of which there are about 60,000 nationwide. Of those, about 15,000 are owned by CVS and Walgreen. Most people aren’t familiar with pharmacy economics. The Walgreen CFO recently told a group of investors that their average gross margin on a $200 brand name drug (30 day supply) is all of $7. At the same time, their gross margin on a $25 generic is $15. Blending the two together, their average prescription brings in revenue of $60 and their gross margin is roundly $12. Their cost to fill each prescription for pharmacy labor, allocated rent for the pharmacy space, the sophisticated IT system that supports the pharmacy, etc. is $7-$9, and they are the most efficient in the business. Their market share last year was 20%. Other than simply refusing to cover and pay for some of the ultra expensive specialty drugs that have come to market in recent years, I don’t think the potential savings from federal drug price negotiation are anywhere near what advocates think or claim. Besides, private insurers have used tiered formularies for years now.

    Unfortunately, I don’t think we have several years to try a few baby steps and see how it goes before adding a few more. I’ve already said what I have to say about individual taxation. Large corporations now do much of their business abroad and manufacture abroad as well. They pay taxes to foreign governments on profits earned abroad and don’t owe U.S. taxes on those profits until they are repatriated. Just as I work in NY and live in NJ, I get a credit for most of my NY taxes paid against my NJ obligation. I don’t pay taxes to both states on the same income. Corporations shouldn’t pay taxes to two different countries on the same income either. Moreover, as I’ve said before, they build their tax expense into their product prices anyway so customers pay the taxes in the end.

  51. Barry,
    I think fixing the health care system is a process, not an event. I believe it is Dr. Urbach, who comments here frequently, that cautions repeatedly that this is a very complex system and we should make small changes and see how they affect the system, make corrections if necessary and then apply more changes, and so forth. Boiling the ocean is not an option. So why not pick, say, two things that most folks would agree with and execute them?
    In the health care summit before ACA was passed, it seemed that every person in the room agreed that Medicare is plagued by fraud and, I believe it was Dr. Coburn that said that if we could curb Medicare fraud, we’d see 30% savings practically overnight. So why not do that? The technology is certainly there.
    Another thing that very few people would disagree with is allowing Medicare to negotiate drug prices. That does not require any rocket science knowledge to accomplish. So, let’s do that.
    And then let’s wait and see what happens for a little while. If all is well, we can move forward with other measures (if necessary).

    I am also assuming that CMS is not some sort of dumb animal and like every enterprise with financial problems, will attempt to set its house in order. With someone like Dr. Berwick at the helm, perhaps an insistence on reducing bed sores, for example, could be put in place and chip a few more cents off the expenses line.
    I know these are not the big ticket items, where tons of money could be saved with one swift swoop. But sometimes it’s better to make small cuts in many simple places, instead of going for a complete makeover. Saving 100 cents is as good as saving a paper dollar.

    Now, if we look at the other unsustainable aspect of health care, i.e. disparities, I think we should just spend the money to cover everybody. And I think we should tax corporations and the wealthy at higher rates and I think we should distribute the wealth more equitably so all Americans can have the same opportunities to prosper.
    I assume you and many more folks disagree. I assume that Congress also cannot reach agreement on these issues. Should we then create a special board outside the political process to make these decisions for us? I don’t think so.

  52. Peter –

    An efficient tax system is one that raises money to fund the government in a way that does as little economic harm as possible. That’s why I support a broad base with low rates. As I’ve said before, I liked the system that we had for a short while following the Tax Reform Act of 1986 when the top marginal tax rate was 28% and it applied to all types of income including capital gains and dividends. If it were up to me, I would go even further and phase out both the mortgage interest deduction and the tax preference for employer provided health insurance. I would limit the charitable deduction to the extent that it exceeds 2% of adjusted gross income and limit the deduction for state and local taxes to the extent that they exceed 5% of income. The EITC could be strengthened, the standard deduction could be raised and the income tax brackets at all levels could be lowered further compared to what they were following passage of the 1986 tax law. If you talk to people who are experts in this field, you will find that the definition of income is far from straightforward. This is why high marginal rates create all sorts of less than productive strategies to create losses and to convert ordinary income to capital gains among other things. With a broad base and low rates, people are much more willing to just pay the tax due without going to all the trouble, including payment of high fees, to accountants and tax lawyers to pursue tax reduction strategies.

    Margalit –

    It’s clear that our current healthcare system is unsustainable. How would you fix it?

  53. Barry,
    Giving politicians cover to say no to their constituents is not equivalent to giving politicians cover to say no to wealthy corporations and wealthy few individuals. Marginalizing the individual voter is not an acceptable answer.
    Perhaps this is the system we have now, but I don’t think we should adapt to a system that is obviously faulty by creating even more non-democratic institutions, because two wrongs very rarely make a right.

  54. Nate, you’re foaming so much at the mouth you can’t read the “quotes”, or can you relate economic activity to government spending, but only choose to relate it to tax cuts. Are you claiming the Bush tax cuts were what drove economic activity during his two terms, or was the 20% debt spending with unregulated thievery for his friends the real engine driver?

    Barry, where is the broad base, certainly not in lifting all economic boats? Why are the rest of us, for the most part, falling further behind, is it that we don’t work hard enough? Did Wall Street securitizers get all that money from honest work? Tell me if this 25% top rate is the end? When will we be sold, yet again, that the rich need more to give us more? Why is it that all tax cuts are followed by more government spending which drive economic activity so the rich can claim tax cuts work. See this time they’ve finally run out of steam and can’t just generate borrowed money to feather their beds, so WE are being asked to do our part by accepting less, while THEY are getting yet another tax cut, cause you just can’t have too many Mercedes Benz.

  55. Hi Nate,
    I came across this great graphic this morning which provides more real world actual fact based confirmation that the US has the worst quality and highest cost health care in the world.

    http://www.medicalbillingandcoding.org/medical-costs-1/
    (Look at the fourth section titled “US ranked last in overall quality of health care…”. The table shows 11 parameters of quality and the US is at or near the bottom in all of them. It also conveniently shows our per capita spending as about twice the other countries.)

    You spend a lot of energy trying to obfuscate and deny the facts but it really would be better if you tried to work on a solution to the problem.

  56. Why does wealth aggregate at the top? Its harder for a rich person to increase their wealth 10% then it is for someone at the bottom of the pay scale. Picking up a second job could double a poor person’s income. its not easy to double a networth of a few million in a year.

    Liberal policies of giving people just enough to get by with out any expoectation of actually getting off assistance is what locks them into poverty. When 20% of your popualtion isn’t making any effort to grow wealth of course it is going to shift to those who are.

    You also have the social problem of poor buying consumable goods instead of assets. rims and sneakers don’t appreaciate in most cases. They have resources they could invest but choose instead to consume

  57. Nate, it seems math can be manipulated either way.
    You get more percent from the rich because they amass disproportionately more wealth, and less percent from the poor because they amass nothing, or get poorer in the process. We had this conversation before, I believe…..

    Let’s assume that you are the rich and have $90 and I am the poor and make $10. Together we have $100 and we both pay 50% in taxes. You will pay $45 and I will pay $5. You paid 90% of receipts and I paid 10%.
    If next year we both double our incomes, we will keep our tax percentages the same, but we will both be paying more money.

    If on the other hand the ratio changes and you have more than 90%, the math will change as well. So let’s say that we have $200 now together, but I still have my $10 and you now have $190. You will pay $95 and I will still pay my $5. However now my percent of receipts went down to 5% and yours went up to 95% and the total collected from you (the rich) also went up – actually more than doubled.

    Is this the magic math you want us to use to justify more tax cuts to the rich?

  58. Peter –

    The economy would be better off with a broad tax base, relatively low marginal rates, and less social engineering. After the Tax Reform Act of 1985 passed, the rich paid more in taxes, not less. By contrast, in the 1950’s, when the top marginal income tax rate was 91% at one point, the top long term capital gains rate was only 25% and there were lots of opportunities to invest in oil and gas, cattle, real estate, etc. with borrowed money on a non-recourse basis which meant the loan didn’t have to be repaid if the deal went sour but the tax write-off could be 5-7 times the amount the investor actually had at risk.

    Tim –

    The culture you describe is exactly why we need an independent body, modeled after the Federal Reserve Board and insulated from politics. If an IPAB refused to cover and pay for Provenge (for prostate cancer), for example, because it was deemed too expensive relative to its benefits, politicians could just tell their constituents who want access to it: I’m sorry but there’s nothing I can do.” It wouldn’t matter if the constituent’s congressman was a democrat or republican. The answer would be the same. That’s what I mean by giving politicians political cover to say no. To politicians, votes are equivalent to profits for a business. Enough votes get a politician reelected. To get enough votes, he/she needs to do lots of favors for a lot of constituents and interest groups, all of which cost money. Since we often don’t have the money, like now, someone has to say no somehow. Short of a crisis, it doesn’t happen unless we can offload the tough decisions and choices to a person or group that doesn’t have to stand for election. Sure, it’s our fault, but that’s the system we have. We need to adapt to it as well as we can.

  59. Peter what are you blabbering about? How do you get off topic in your own post between paragraphs?

    “There was more investment, more hiring by businesses, and a stronger stock market.”

    Then you rambel on about debt to GDP? What the heck are you talking about? investment, hiring, stock market have nothing to do with debt to GDP.

  60. “who cares what the tax rate is”

    Republicans seem to care, you seem to care, Barry cares, the rich seem to care. There’s gotta be something to it.

    “There was more investment, more hiring by businesses, and a stronger stock market.”

    When? During Reagan when debt to GDP rose 11.3% in his first term and 9.3% in his second, or during Bush1 when debt to GDP rose 15%, or during Bush2 when debt to GDP rose 7% in his first term and 20% in his second or at the end of Bush2 when jobs tanked, the stock market tanked, investment tanked, people lost homes and equity and businesses and savings and their health insurance(just to keep it somewhat on topic), while Wall Street banks and investment houses got free money from the treasury and taxpayers (like you Nate). Even AIG got bailed out by taxpayers to pay off bogus insurance contracts and all the while bonuses just kept on truck’n?

    The real welfare bums in this country is corporate America and the super rich.

  61. Culture eats strategy for lunch. Substitute your favorite word for “strategy” and you have an explanation why this discussion floats along at the surface of the problem, bandying myths back and forth. The human race has a cultural problem, which improved social engineering cannot fix.

    Myth: “we need a better Congress”.
    We get the Congress we elect, and what we elect, for the most part, is not a group of people to solve the country’s problems, but individuals to bring back to the home district more money than the district puts in. More back than in. Got that? Call this one small unit, this one district, a piece of the larger political molecule, call it an atom with a Ponzi charge. (By “charge” I mean the sum of the incentives.) Now, construct a Congress out of 535 of these Ponzi atoms. You really, seriously think some added-on structure can keep those Ponzi atoms from organically forming a Ponzi molecule, meaning an aggregated structure with a charge of ‘more out than in”? Really? We’re in a society-wide act of self hypnosis; let’s vote to get 10 dollars, pay 7 dollars, and then tell our agents to appoint Boards to keep them from spending 10 dollars. It is absolute insanity.

    Yet, here are the brightest people in the field, arguing about what kind of coating can keep the molecule from acting consistently with its own charge.

    It is just not logically possible for the lawmakers to make a law (or create a body) that prevents them from acting like they would act if they hadn’t made the law. The people who make the first law can un-do it with a second, or subvert it with a series of 30 small laws.

    You can’t have a Congress that represents the culture and expect it to form a strategy that acts against the culture.

  62. sorry missed the “s

    “But Americans did respond to the tax cuts. There was more investment, more hiring by businesses, and a stronger stock market. When we compare the taxes paid under the old system with those paid after the Bush tax cuts, the rich are now actually paying a higher proportion of income taxes. The latest IRS data show an increase of more than $100 billion in tax payments from the wealthy by 2005 alone. The number of tax filers who claimed taxable income of more than $1 million increased from approximately 180,000 in 2003 to over 300,000 in 2005. The total taxes paid by these millionaire households rose by about 80 percent in two years, from $132 billion to $236 billion.”

  63. “Barry, top tax rates have dropped from 50% in 1982 to 35% today”

    That is a meaningless number, who cares what the tax rate is we care what tax receipts are. You can’t spend rates you spend actual money.

    If you tax $1,000,000 at 50% you get $500,000. If you tax $2,000,000 at 35% you get $700,000. Tax receipts under Bush increased when they lowered the rate. An accurate analysis would look at what percent of taxes the rich paid;

    According to a report issued by the Congressional Budget Office (CBO), the tax cuts significantly increased the share of federal income taxes paid by the highest-earning 20 percent of households compared to their levels in 2000, President Clinton’s final year in office.

    In 2006, the latest available year from CBO, the top 20 percent of income earners paid 86.3 percent of all federal income taxes, an all-time high.[1] This is an increase of over 6 percent from 2000, when the top 20 percent paid 81.2 percent. During the same period, the bottom four quintiles all saw their share of the federal income tax burden fall sharply:

    The bottom 20 percent of income earners’ share of federal income taxes fell from -1.6 percent in 2000 to -2.8 percent in 2006;
    The next 20 percent’s share declined from 1.1 percent to -0.8 percent;
    The middle quintile’s share dropped from 5.7 percent to 4.4 percent; and
    The fourth quintile’s share decreased from 13.5 percent to 12.9 percent.
    Each of these four quintiles’ shares was an all-time low.

    aaahhhhh no wonder liberals never want to discuss it in an accurate and intellectual manner.

    But Americans did respond to the tax cuts. There was more investment, more hiring by businesses, and a stronger stock market. When we compare the taxes paid under the old system with those paid after the Bush tax cuts, the rich are now actually paying a higher proportion of income taxes. The latest IRS data show an increase of more than $100 billion in tax payments from the wealthy by 2005 alone. The number of tax filers who claimed taxable income of more than $1 million increased from approximately 180,000 in 2003 to over 300,000 in 2005. The total taxes paid by these millionaire households rose by about 80 percent in two years, from $132 billion to $236 billion.

    Liberals are incapable of running anything more complex then a lemonade stand, the old school ones not the one susie in the verizon commercials built.

    ” How do you operate a successful country for any length of time on a virtual oligarchy that continues to concentrate wealth at the top?”

    You stop enslaving large portions of your population in liberal welfare frauds. What the hell did you think would happen when you hood generations on welfare, medicaid and government handouts. You give them just enough to get by and live then act shocked they aren’t working and accumulating wealth.

  64. “but plenty of support for raising taxes on the wealthy. Of course there is support for the latter because it would only affect about 2% of the population.”

    Barry, top tax rates have dropped from 50% in 1982 to 35% today, over the same period the concentration of wealth has accumulated to the top 1%. The wealthiest 1 percent of families owns roughly 34.3% of the nation’s net worth, the top 10% of families owns over 71%, and the bottom 40% of the population owns way less than 1%. How do you operate a successful country for any length of time on a virtual oligarchy that continues to concentrate wealth at the top? This same group of wealthy also get home mortgage interest subsidies, farm subsidies, tax free health insurance and all sorts of other tax loopholes and write offs. The wealthy also get the Fed and moderate taxpayers to bailout them out when their financially deregulated ponzi schemes finally can’t be sustained any longer.

    Ryan’s proposal includes the top tax rate to drop to 25%, I guess to get the secret financial contributions necessary to convince the stupid masses to vote against their interests. You bet there’s support for raising taxes on the “wealthy”.

  65. for example compare Utah spending for working adults to that of any european country and we aren’t that far off. Factor in our quicker access to care, more drugs and surgeries and you have pariety. What drags the country as a whole down is liberal managed healthcare, MA, NJ, NY, Medicare, get rid of those and we are within acceptable range.

  66. I can’t find exact numbers but using 13% of population is inaccurate becuase they have a higher birthrate. You would need to find what percent of total births they are. I did find this though;

    The infant mortality rate for Black babies (15.1 for every 1,000 live births) is decreasing but remains more than twice that for White babies (6.3 for every 1,000 live births).

    in 2000 it was 17 vs 14 per thousand

    http://minorityhealth.hhs.gov/templates/browse.aspx?lvl=2&lvlID=54

    In 2005, infant mortality rates for Hispanic subpopulations ranged from 4.4 per 1,000 live births to 8.3 per 1,000 live births, compared to the non-Hispanic white infant mortality rate of 5.8 per 1,000 live births.
    In 2005, Puerto Ricans had 1.4 times the infant mortality rate of non-Hispanic whites.
    Puerto Rican infants were twice as likely to die from causes related to low birthweight, as compared to non-Hispanic white infants.
    Mexican American mothers were 2.5 times as likely as non-Hispanic white mothers to begin prenatal care in the 3rd trimester, or not receive prenatal care at all.

    Puerto Rico problem was surprising

    “But this is a stupid game. Let’s say that European nations are no better than the US when it comes to your white apples to white apples. They still spend 50% less to get there. And no, it is not mostly about rationing.”

    Actually yes it is. They ration end of life care which amounts for a huge portion of our spending, our most expensive plan by far is Medicare. If you break spending down majority of the disparity comes from the beginning and end of life.

  67. ” Also note Germany has big Turk and mid-east population. Saw Germam team in FIFA last year? 70% were immigrant born.”

    seen our baseball and basketball teams, ethnic make up does not accurtly reflect minority population.

    Could you see us doing this here?

    it is estimated that approximately 50,000 Turks have lost their German citizenship.

    Turks are what 2% of Germany, hardly on the level of african american or latino populations in the US.

    How do young minorities alter infant mortality? I don’t follow what your trying to say in 1 or 3

    “2. Your ability to give affordable insurance is based upon employers culling out chronically sick employees who then get turned over to Medicaid ultimately.”

    What are you talking about? How do we cull sick people and move them to Medicaid? Great example of the problems with liberals, you never speak the truth no matter how simple the discussion. You just make stuff up out of no where and hope people don’t fact check you. Even if they do most liberals are so stupid they buy it anyways. I can’t wait to hear how you came up with this BS about culling people and moving them to Medicaid, not that you will actually answer, you’ll just pull the typical liberal disappearling act then pop up again in a different thread to make up more bs

  68. sadly that sums up our problem with government, any time they don’t completly screw something up we view it as a positive. Yes we are better off sans 350 installations but a number of them never should have been built in the first place and 350+ should have been closed decades ago.

    When I think about issues like military pay, quality of care at Reed and VA in general, and other problems where a lack of money is the excuse then see all the money wasted on bases…..

  69. Margalit –

    I think medicine is a special case because of the expertise needed to assess what works and what doesn’t in the context of a system that is already way too expensive and growing at an unsustainable pace. Think the UK’s NICE when it comes to making coverage and payment decisions based on cost-effectiveness. Besides, if I remember correctly, under current law, Congress would have 60 days to overrule IPAB decisions but it would have to come up with alternative savings itself.

    I also agree with most of Vikram’s assessment including the likelihood of a two tier medical system as the wealthy will always be able to buy up, go to another country or otherwise access treatments not available to or affordable for the rest of the population. So be it. I would be perfectly willing to live with such a system myself.

  70. Barry & Margalit- enjoyed your conversation.

    Taking IPAB out of congress control is interesting route, though not a pleasing one. But if nothing else works, they have to come through. However they would need very wide range of powers to control revolting stakeholders.

    IPAB is based on theory that providers and pharma are flush, so they can be squeezed. May be true about Pharma, but cant say about providers.

    If no one is willing to pay up further, there will be only way to go and that is 2nd tier mdicine system. That may not be necessarily worse off in terms of result. The elephant in the room always is western evidence based medicine, which is an expensive medicine style whose ROI over lifetime is not very high.

    Currently State Medical Boardes contrive to kill cheaper/alternative options in guise of patient safety or quackery claims. If I try to say that, say meditation can cure diabetes I might get notices from these agencies. Medical Toursim will also be part of that 2nd tier. I am not sure if Paul Ryan’s system permitted re-imbursing vouchers abroad. The competion needs to be truly global.

  71. Nate, back to outliers again, Anyway lets start.

    1. “NHS wont resuscitate babies under 23 week. Did you mean babies born at 23 weeks pregnancy? The two are not same you know. And the person who said this was Dr. Daphne Austin. And what are conservatives doing now- appointing GPs to take decisions. Not very different. Hopefully I won’t have to tell you why this decision was taken.

    2. Infant mortality: Thanks of verbatim copying whatever that ignorant autor was trying to prove. US is on bottom of his table. So he gave different standards of measurement of pre-mature birth in some countries. Sweden and Gemany have exact same standard as US and they are higher than US. Also note Germany has big Turk and mid-east population. Saw Germam team in FIFA last year? 70% were immigrant born.

    3. Minority are altering statistics: Hard to believe since many immigrant minority are younger. Still if they are impacting stats right now they will compensate for older and sicker majority. They are already compensating for birth rates.

    More than reading, what is necessary is analysis.

    There are still two questions you haven’t answered over the year.

    1. What have you done to defend the republic?

    2. Your ability to give affordable insurance is based upon employers culling out chronically sick employees who then get turned over to Medicaid ultimately. You did raise the legal bogey citing lawsuit. Here are some comments on how people got laid off inspite of ADA/FMLA. And it’s not like sometime they can continuosly work either. They do want a break, but can’t return back either.

    http://well.blogs.nytimes.com/2009/06/19/managing-chronic-illness-at-work/

  72. The “Latino” population of Spain is over 80%. 12% are immigrants, mostly from Africa, Central America and Eastern Europe. Even if you insist on counting Spanish natives as White, it’s about 10% non-White minorities. The US has a higher fraction of non-White minorities. But note that Latinos/Hispanics do not have a higher infant mortality rate in the US, so all that is irrelevant. Only Americans of African descent have substantially higher rates, and they are only 13% of the US population, which isn’t enough to move the needle very much for the population as a whole for infant mortality rates.

    But this is a stupid game. Let’s say that European nations are no better than the US when it comes to your white apples to white apples. They still spend 50% less to get there. And no, it is not mostly about rationing.

  73. While I will agree that Congress needs a spine, I will point out that the base closing commission has closed about 350 installations in 5 rounds. Not perfect, but pretty good. They closed down some of my old bases.

    Steve

  74. Well, after two dozen comments, it may be appropriate to note that the title of my post, as transmiited to THCB, was “…Two Infeasible Proposals…” I’m not taking a political position, but I am deeply disappointed with both parties’ solutions (for want of a better word) to the ever-escalating costs of Medicare. It must be obvious to each party that their proposals have no chance of passage, so why not try to find some middle ground? Or is it just too late in the morass of DC politics?

  75. I worked throughout the poor areas of west Philly getting through med school. The poor do not live in large homes. The poor today usually have a cell phone but no land line. It is how they find work. They usually buy used TVs that can be had for a couple hundred dollars, if that. Have you ever walked around a “project”?

    Steve

  76. Barry,
    Isn’t there a difference between a committee of experts appointed to research and make learned recommendations. and a committee appointed to make independent and irrefutable decisions?

    I do understand that Congress is in somewhat disarray, to say the least, but do you really think that going the committees route is the best long term solution to this political issue?
    The baby and the bathwater come to mind…..

  77. “. I don’t buy the arguments that Congress realizes that they are weak and incapable of making though decisions and therefore we must submit the issue to expert arbitration.”

    Margalit where the beep have you been living?

    9/11 commission
    Base closing commission
    HMO Act 1973
    Medicare reimbursement cut legislation they always override

    Congress has been openly spineless for decades. Those are just off the top of my head there are atlest a dozen more cases of congress outsourcing their obligation.

    Then look how they pass their responsibility to the courts to write the laws they don’t have the will to.

  78. Margalit –

    The fact is that voters simply want more from government than they’re willing to pay for. Just in the last few days, a survey showed widespread opposition to any meaningful cuts in Medicare or Medicaid but plenty of support for raising taxes on the wealthy. Of course there is support for the latter because it would only affect about 2% of the population. If those doing the survey asked people what program changes that could save money or tax increases would they support that affect THEM, I don’t think they would get much useful input.

    Since 1913, the unelected (but confirmed by the Senate) Federal Reserve Board has set monetary policy. Do you think elected politicians should take over that function? Would they do a better job? Not likely. Politicians couldn’t reach any sort of consensus on what military bases to close so they outsourced the job to the Base Realignment and Closure Commission (BRAC). Even though Nate doesn’t think the BRAC did a great job, they did a heck of a lot better than the elected representatives would have done because politicians only want to close bases in someone else’s district. The Social Security Reforms of 1983 would not have happened unless the Greenspan Commission paved the way first. President Obama proposed the Debt Commission led by Erskin Bowles and Alan Simpson to come up with ideas to tackle the long term federal deficit because Congress wasn’t up to the job. The list goes on. Heck, Congress couldn’t even bring itself to subject durable medical equipment to competitive bidding even though a pilot program showed it would save a few billion dollars. Give me a break!

  79. “provide better care and costs will go down. ”

    won’t better care keep people alive longer to consume more care then slowiy die in nursing homes at high cost?

  80. Barry, I do have certain disagreements with you about the solution you are suggesting, but that’s not the point I want to make.

    I take issue with this phrase: “a mechanism that provides politicians with the political cover to say no to beneficiaries”

    What this means is that somehow politicians should have a way of denying voters their wishes and not paying the price for such dereliction of duty. They are supposed to be public servants, not public lords. I don’t believe a mechanism like this one belongs in a democracy. I don’t believe elected politicians should have the option of saying that health care is out of their hands, i.e. the people’s hands. Whose hands is it in then? Is this still a democratic process, if people and their elected representatives cannot change anything?

    Now, I don’t think IPAB is a bad idea. It is a bad idea to keep IPAB outside the democratic process. I don’t buy the arguments that Congress realizes that they are weak and incapable of making though decisions and therefore we must submit the issue to expert arbitration.

    If Congress cannot do its job, then we should elect a new Congress, because today it’s health care, tomorrow it will be social services, the next day the environment, after that education and so forth, until this entire country is run by committees with no input from the people.

    So what exactly do we need elections for? To pick small expert dictatorial panels that will solve all our problems because the wisdom of experts trumps the wishes of the electorate?

    I don’t like where this is going. I’d rather pay the price for making bad decisions, then having no power to affect decision making.

  81. Only two ways to control the Medicare budget? Don Berwick thinks there’s another: provide better care and costs will go down.

    According to Kaiser Health News, Medicare chief Don Berwick recently said that “improving the quality of care and reducing waste will avoid the trigger and yield big savings by keeping people healthy and avoiding medical complications. ‘There are two ways to save money,’ Berwick told the journalists meeting. ‘One is to cut and the other is to improve.’ He cited hospitals that have dramatically reduced patients’ bed sores and another that adopted efficiency steps from Toyota to save millions of dollars while also delivering better care.”

    Enough hand-wringing. We need more accountability in health care; and don’t tell me that “would almost certainly lead to a wholesale exit of doctors from the program.”

  82. Actually, outpatient spending is one of, if not the biggest, reason why our care costs more than it does in other countries. Yes, a lot of outpatient care also occurs at hospitals.

    http://theincidentaleconomist.com/wordpress/what-makes-the-us-health-care-system-so-expensive-–-outpatient-care/

    You can compare that with inpatient spending here.

    http://theincidentaleconomist.com/wordpress/what-makes-the-us-health-care-system-so-expensive-–-inpatient-care/

    Steve

  83. It’s hard to imagine the normal political process bringing Medicare (or Medicaid) costs under control anytime soon without a mechanism that provides politicians with the political cover to say no to beneficiaries. I think the best way to do that is to arrive at a collective judgment that we, as a country, a society, and an economy, cannot afford to spend more than X% of GDP on healthcare for beneficiaries in these two programs. A body like the proposed IPAB, modeled after the Federal Reserve, could be given the difficult task to make that happen, but they would need the full array of tools at their disposal. These include specifically taking costs into account in determining what will be covered and paid for. They would include limited drug formularies or, at least formulary tiering. They would include provider tiering. Services, tests and procedures that either don’t work or cost more than they’re worth based on QALY metrics or some similar approach would not be covered. People who want those services and ultra expensive specialty drugs can self-pay. There is a fundamental disagreement around whether or not this is rationing of care. I don’t think it is. Organ transplants are rationed. We cover and pay for them but there aren’t enough for all who need them so we develop elaborate protocols to determine who gets them and who doesn’t. The bottom line is that resources are finite and we can’t afford to provide everyone with every service, test, procedure or drug that might benefit them, however marginally and expect someone else to pay for it. In short, we need to grow up. Politicians, for their part, need to worry less about the next election and more about the next generation.

  84. Why are they lining up in Sacramento? Is it because they don’t have access like you claim, or they choose not to use the system most of us use? I noticed a lot of cars in that parking lot. Some nice watches as well as designer and name brand clothes. Statistics would also tell you these people go home to a house much bigger then those in other developed countries. They own more cars, more TVs, and spend more on cell phones.

    While you try to frame this as people being denied access its just not true. We know without doubt that almost every person pictured decided freely to spend their money on other items then healthcare.

    If you think this is a problem then lets tax the poor, lets take away their cell phones, large homes, TVs and everything else and give them healthcare instead.

  85. who ever owns the surgical center or lab is going to try and make a profit and drive business to it. Unless you have publicly owned everything where no one is looking to make a profit your going to have profit motive.

  86. typical liberal, get your back side handed to you in debate so throw out the racism card. So sad.

    Its a fact that US has a higher population of latinos and african decent. These minorities have different genetics and health characteristics then other minorities like asians for example.

    If you had the exact same healthcare system treating a population 100% asian and another treating a population 100% African they would have considerably different results.

    This is borne out in the different outcomes of different minorities in the same system.

    Some keep masking your ignorance with cries of racism and sexism and what ever else distracts of how little you know and how much less you understand.

  87. Yes, Nate, this is all statistics and it may be misleading. Folks in this country who have access and are able to pay for the “standard of care” probably get very good medical care compared to other nations.
    The problem, which for is probably not a problem at all, is that many have no access to that type of care and when you average things out, the numbers are reflective of these disparities.
    Show me another developed country in the world where you find scenes like this one in California
    http://www.sacbee.com/2011/04/01/3519370/four-day-free-clinic-opens-today.html

    I say we have a problem, whether you want to admit to it or not, and it’s your problem as much as it is the problem of the folks lining up in Sacramento.

  88. Dear Nate,
    I won’t debate your racist assumptions about “afroamerican and latino” populations but clearly you have not spent much time in other developed countries which are far from the homogeneous “pure race” stereotypes which you seem to believe in.

  89. Laboratory physicians who do not see patients directly, but own their own lab DO NOT refer to their own labs. How could they? They don’t see patients. The patient’s specimen is referred to the lab by another physician.

    Radiologists do not see patients initially—the patient is referred to the radiologist by a non-radiologist.

    GI, Derms, and urologists that own their labs do increase the cost of healthcare. They see the patient and then refer to their own lab. If this was illegal, then it would not happen. It is legal, so it happens.

  90. “Same genetics?
    – The US is a melting pot of all of the other countries mentioned so it is “similar”.

    Really Mark, what is the Afroamerican and Latino population of these other countires you speak?

  91. “Do all these countries make the same effort to save babies?
    – No. Other countries do a better job at saving babies.”

    Sorry Mark, NHS for example won’t attempt to resuscitate babies under 23 weeks.

    “Guidelines currently state that doctors should not try to resuscitate babies born under 22 weeks, as they are too underdeveloped, but those born between 22 and 24 weeks should be given intensive care.”

    wonder what else yoiu aren’t aware of. Standard work quality for the WHO that’s why I don’t give much credit to anything they publish, far more propoganda then science.

    http://www.nationalcenter.org/NPA547ComparativeHealth.html

    The United Nations Statistics Division, which collects data on infant mortality, stipulates that an infant, once it is removed from its mother and then “breathes or shows any other evidence of life such as beating of the heart, pulsation of the umbilical cord, or definite movement of voluntary muscles… is considered live-born regardless of gestational age.”16 While the U.S. follows that definition, many other nations do not. Demographer Nicholas Eberstadt notes that in Switzerland “an infant must be at least 30 centimeters long at birth to be counted as living.”17 This excludes many of the most vulnerable infants from Switzerland’s infant mortality measure.

    Switzerland is far from the only nation to have peculiarities in its measure. Italy has at least three different definitions for infant deaths in different regions of the nation.18 The United Nations Statistics Division notes many other differences.19 Japan counts only births to Japanese nationals living in Japan, not abroad. Finland, France and Norway, by contrast, do count births to nationals living outside of the country. Belgium includes births to its armed forces living outside Belgium but not births to foreign armed forces living in Belgium. Finally, Canada counts births to Canadians living in the U.S., but not Americans living in Canada. In short, many nations count births that are in no way an indication of the efficacy of their own health care systems.

    read the whole paper as it does a great job destructing the liberal dogma of life expectency and infant mortality

  92. Conflict-of-interest concerns affect the entire economy, not just health care. Empirical studies in medicine concerning conflict of interest are particularly powerful. They consistently show that when physicians own their own laboratories, imaging equipment, pharmacies, and surgical centers, there is marked excess in the use of these facilities. 1

    1. Impact of physician self-referral on use of imaging services within an episode. In: Report to the Congress-Improving incentives in the Medicare program. Washington DC: Medicare Payment Advisory Commission, June 2009; pages 81- 96. Accessed June 25, 2010 at http://www.medpac.gov/documents/Jum09_EntireReport.pdf).

  93. So as not to be “over simpliefied” (sic), I will address your questions:

    ” United States 41st in the world for infant mortality rate”

    Do all these countries measure infant mortaility the same?
    – Yes
    Do all these countries make the same effort to save babies?
    – No. Other countries do a better job at saving babies.
    Do all of these countires have similar populations?
    – No. Other countries have better health care and healthier populations.

    ” 46th for total life expectancy”

    Same population?
    – No. These are different countries. The US is not as healthy and people die earlier.
    Same genetics?
    – The US is a melting pot of all of the other countries mentioned so it is “similar”.
    Immigration patters?
    – The US has more immigration than some of the other developed countries and less than others. They all have better health than the US. (Immigrants tend to be younger and healthier than the indigenous population.)

    Note: I worked for the World Health Organization in Geneva in the department which compiled annual health statistics so I do have intimate knowledge of these statistics. The WHO numbers are similar to the ones I quoted from the CIA and OECD.

  94. The lack of understanding never ceases to amaze me. Phsyician ownership is not the problem. Hospitals are where the big money is, not imaging centers or surgicenters. There are ways to make sure doctors are not getting kick backs or violating the Stark Law.

  95. lol Mark, you liberals are all so simple. So now that you have the basic task of comparing two numbers let me show you some advanced skills.

    ” United States 41st in the world for infant mortality rate”

    Do all these countries measure infant mortaility the same?
    Do all these countries make the same effort to save babies?
    Do all of these countires have similar populations?

    ” 46th for total life expectancy”

    Same population?
    Same genetics?
    Immigration patters?

    wow that just blew your mind didn’t it, no one ever showed you how facts can be manipulated or over simpliefied have they?

  96. Hi Nate,
    I guess your statement is not intended to be “fact based” but rather is similar to the mindless ranting at sports events “We’re number one!!”
    You can look at any list of standard health indicators for developed countries and find the US at or near the bottom (apples to apples).
    Here are a few “reality based” facts:
    The CIA World Factbook ranked the United States 41st in the world for infant mortality rate[105] and 46th for total life expectancy.[106] A study found that between 1997 and 2003, preventable deaths declined more slowly in the United States than in 18 other industrialized nations.[107] For example, the United States was listed as 37th for life expectancy and 41st in low birth weight.[108]

    The Organisation for Economic Co-operation and Development (OECD) found that the United States ranked poorly in terms of Years of potential life lost (YPLL), a statistical measure of years of life lost under the age of 70 that were amenable to being saved by health care. Among OECD nations for which data are available, the United States ranked third last for the health care of women (after Mexico and Hungary) and fifth last for men (Slovakia and Poland were also worse). See the table and source at YPLL for details.

  97. “physician ownership of surgicenters and imaging centers.”

    Why is this always bad? A free standing or seperate owned facility would have higher cost then an efficently ran physician owned. This is a perfect example of the shortcomming of the IPAB. The problem is not physician ownership, the problem is excessive utilization by some physicians. The wrong way to fix this is outlaw all physician ownership. A great example of this failure in logic was the reduction in Dx reimbursements, Medicare was spending to much on testing so they reduced the reimbursement of all test, the legit and the wasteful. It solved nothing. If you outlaw physician ownership then where is the business going to go? Back to the hospital which is even more expensive!

    The base clsoing commission was a complete failure and far from a model of success. It was still overly political and didn’t close bases nearly quick enough or close as many as needed to be closed.

  98. Bowles-Simpson advocated for a beefed up IPAB to help control costs. I suspect that they could use cost/comparable effectiveness research to not pay for treatments that are ineffective or cost more than equivalent therapies. The IPAB could also go after low hanging fruit like physician ownership of surgicenters and imaging centers. Some limitations could be placed upon the Medicare formulary w/o running into rationing, I think. There is also no reason why the IPAB could not employ market mechanisms to try to reduce costs, a point often neglected by the right. The strongest point for the IPAB is its predecessor, the base closing commission. This model has worked to remove Congress from contentious political decisions.

    Steve

  99. ” (and better health indicators)”

    Their apples have better indicators then our oranges. Apples to Apples no country is better then the US.

  100. I think the IPAB has a chance to reduce costs if it we can keep the politicians from destroying it (article in today’s NY Times). The IPAB can eliminate ineffective, overused and overpriced procedures if it can remain independent.
    If you look at any of the other 20 developed countries which have health care spending which is about half of the US per capita (and better health indicators), you will see that they all have strong regulation of prices and services through a mechanism similar to the IPAB. This is the key to reducing costs.
    Of course, in the US, you have a corporate kleptocracy (government “of the 1%, by the 1% and for the 1%) so the medical industry can usually buy whatever legislation it needs to preserve high profits and it will be difficult to preserve the independence of the IPAB.

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