The privatization of government functions too often looks like Adopt A Parasite.

Here in Indiana, Mitch Daniels privatized social services and it has resulted in a huge decline in service with huge cost increase to the state.

Where is the evidence that privatization is better than the government doing it itself? Medicare D is certainly more complicated with all the private insurance offers and it is no cheaper than expansion of Medicare to prescription drugs would have been. Instead we get middlemen that demand their cut of the profit so they can pay their multimillion dollar CEOs. Since they provide no value to the individual, but cost money, they are parasites.

Too often the privatizers deliver no value to the system and are not held accountable.

This was my favorite from the column:

A second detail is whether the government will grant the public plan the power to impose special deals with suppliers like hospitals and drug companies — a move that would dampen, not enhance, competition with the private sector.

Presumably by 'special deals' he means negotiating for lower prices. That's one of the main points of a public option. Having a provider with lower costs dampens competition??

Well said!

Social Security: Truth or Useful Fictions?

By L. Randall Wray [via CFEPS]

I. SOCIAL SECURITY IS AN ASSURANCE , NOT A PENSION PLAN

Social Security is an intergenerational assurance plan. Working generations agree to take care of retirees, dependents, survivors, and persons with disabilities. Currently, spouses, children, or parents of eligible workers make up more than a quarter of beneficiaries on OASDI. A large proportion will always be people without "normal" work histories who could not have made sufficient contributions to entitle them to a decent pension. Still, as a society, we have decided they should receive benefits.

http://neweconomicperspectives.blogspot.com/2009/08/social-security-truth-or-useful.html

The right wing mocks anything government does (as far as providing social services is concerned - the military is one of their sacred cows), yet seems terrified of a public option.

This contradiction proves that right wing objections to health care are purely ideological.

Above posted by me.

the argument is whether to change the nature of US private insurance sector

other countries have private insurance sectors different than ours

the argument narrative should include the experience of these countries

i think the administration has been ineffective in painting a picture of a private health insurance alternative

they are in the process of adding 40 million people to the health insurance market (with government money)

i think they need to say more than a "public option" will make insurance companies more competitive

The objection by Private Insurance to the Public Option is in part a blind, the real danger to them are the profit controls contained in Secs 111-116 of the House bill. Combined these provisions make gaming the risk pool impossible, at least on paper, and Sec 116 provides a way to punish any gaming they manage to do despite the controls of 111 to 115.

I have already seen reporting that indicates there is a big push to change 113 which establishes a limit of 2 to 1 for what insurance companies can charge old over young insurees, the companies are pushing for something between 5 to 1 and 7 to 1. But an even bigger danger is 116 even if there is no public option but even more so if there is. The relevant part of 116 is just a few lines in the bill but has what is for the private companies a poison pill.

SEC. 116. ENSURING VALUE AND LOWER PREMIUMS. (a) IN GENERAL.—A qualified health benefits plan shall meet a medical loss ratio as defined by the Commissioner. For any plan year in which the qualified health benefits plan does not meet such medical loss ratio, QHBP offering entity shall provide in a manner specified by the Commissioner for rebates to enrollees of payment sufficient to meet such loss ratio.

What exactly do they do? What is the point of competition in an industry that DOES NOT PROVIDE ANY ADDED VALUE? The private health insurance industry increases healthcare costs by 20%, and doesn't do anything useful in return.

It's not really a productive industry, and it can be replaced by a button on a computer.

Basically they gamble in the financial markets, promising to cover your proctologist. They just skim the money off the top -- and also contribute to Congressional campaign coffers, to keep the flimflam going! We just had to bail-out the rich bums on Wall Street, INCLUDING these insurance companies. Isn't that also a part of the unnecessary cost of healthcare?

But a public option won't put them out of business -- it will put them into a NEW business. The new equilibrium can be something like universal nonprofit baseline coverage, PLUS extra private insurance if you want it and can afford it, to cover new things and elective procedures. And that will be quite profitable!

PEOPLE IF THEY WANT IT SHOULD BE ABLE TO CHOOSE A PUBLIC OPTION OF UNIVERSAL COVERAGE. People should have a choice to get healthcare without paying the 20% that insurance companies add to the bill. That is an enormous chunk of the GDP. They don't do anything for it; they give NO added value. How are we going to bring down healthcare costs if people can't choose to go without this useless drain on the system? Why in hell are we protecting this industry?

P.S. Prof. Thaler's article is, respectfully, somewhat incomplete on the economics. He writes that "governments are not very good at innovation." BUT well-designed institutions can reduce transaction costs, which add up to half of the GDP. A "reduction in transaction costs" is isomorphic to an "innovation." (In fact this is what happens, abstractly, inside of an efficient tool or piece of machinery or work process.) If the institution is tightly focused, transparent and democratically accountable, that provides compensation for the lack of market competition, to keep it efficient and honest. Q.E.D.

Without the public option health reform, if any reform passes, would be a hollow victory and a mortal wound to our long-term fiscal health. It seems the for-profit health cartel has won everything except the ability to deny or rescind insurance due to health conditions. That reform alone would save lives, but otherwise this reform campaign has been a total disaster.

Those who are serious about budget deficits should wholeheartedly support the public option because it appears to be the only way to control long-term cost growth, other than denying care, an effective death sentence no serious moral thinker would advocate.

A public plan may come to dominate the market, but presumably this would mean that it is providing better service for the money than private competitors, actual or potential. Isn't that what free market types would believe?

I was under the impression that free-market hyper-partisan fundamentalists were concerned with one thing and one thing only: an unfettered capacity to maximize personal wealth. Efficiency, while highly touted as a by-product of unbridled state capitalism, just doesn't seem to be a result stemming from the system. The placebo and cliche "a rising tide lifts all boats" is rank propaganda, fervently believed by the botched and bungled free-marketeers and a convenient excuse to engage in private vice and the pursuit of greed with reckless abandon.

"Prof. Thaler....writes that 'governments are not very good at innovation.'"

That claim is unabashed tripe.

GIVE MEDICARE/MEDICAID ITS OWN TRUST FUND, call Pelosi @1-202-225-0100. DEMAND SINGLE PAYER.

What's also strange about Thaler's column is that if you read it, you'd never know that he was a big name in Behavioral Economics. The health care debate has had one amazing example after another of how people don't think rationally (and I don't mean just the Big Lies). You'd think that people at town hall meetings telling their representatives, “keep your government hands off my Medicare" would be like catnip to a behavioral economist.

But Thaler doesn't go anywhere near it. Why? Maybe because if he did, he'd have to take a closer look at the role that insurance companies are playing in this debate. They don't buy his argument – if they did, they wouldn't be spending millions to gin up fears about death panels, Socialism, etc.
http://rethinkecon.org/2009/08/17/richard-thaler-wimps-out-or-the-limits-of-behavioral-economists/

I can't believe that CEPR would even make the following statement:

"But no one in the Obama camp is talking about outlawing private insurance, so if we did have a huge government plan that became bureaucratic and inept, why wouldn't smart enterprising individuals set up private insurers to compete with it? If the system is bad, then wouldn't the free market allow for competitors to take away market share?"

The government has limitless funds by means of taxes and printing money. Just because a gov program because bloated and inefficient doesn't mean that the government can't still keep their market prices artificially suppressed via their limitless means of funding. Private businesses do not have this option.

Ben wrote, ...mean that the government can't still keep their market prices artificially suppressed via their limitless means of funding.

There's no evidence that the government will unfairly subsidize the public plan(s).

In fact, right now the government unfairly subsidizes private plans having to do with Medicare.

You say that there's no evidence that the gov will subsidize the public plan(s), but you acknowledge that the gov has the ability to do so. So let's say that the benevolent-Obama never tries to follow through on his earlier stated goal of driving out private insurers and having gov run health care for all. The next guy might. And maybe CEPR will be ok with that. But I'm not. And anyone with kids shouldn't be either. Because somewhere down the line, it's going to have to be paid for. Please read this article for a concise explanation on what a truly free market health care system would look like. http://money.cnn.com/2009/08/14/news/economy/health_care_solution.fortune/index.htm?postversion=2009081410

Ben wrote, You say that there's no evidence that the gov will subsidize the public plan(s), but you acknowledge that the gov has the ability to do so.

By that criterion, we should eliminate the government entirely, because it's always possible the government could somehow sneakily socialize an industry, with its limitless subsidy powers.

So let's say that the benevolent-Obama never tries to follow through on his earlier stated goal of driving out private insurers and having gov run health care for all. The next guy might. And maybe CEPR will be ok with that. But I'm not. And anyone with kids shouldn't be either. Because somewhere down the line, it's going to have to be paid for.

So what? Private insurance has to be paid for, too.

Look at Britain. It's health insurance and health care is mostly government funded and controlled. And yet they spend less on health care than we do on publicly funded health care.

Please read this article for a concise explanation on what a truly free market health care system would look like.

Huh? It's well-understood that it's impossible to design an effective private market for health care, because incentives are perverse, and there's no way to realign them properly, as documented in The Best Care Anywhere.

Ben wrote, Please read this article for a concise explanation on what a truly free market health care system would look like.

I only skimmed the piece, but AFAICT it's laughable. Why?

Because the idea of consumers keeping costs low is laughable. Everyone with an understanding of health care economics knows that.

First, the bulk of spending as well as waste is in the big expenditures, so having high deductibles isn't going to fix anything, unless you set the deductible at infinity.

Second, one feature of health care is that consumption decisions are made by sellers. You might wake up one morning and say to yourself, "I want to buy a new PC today." You don't wake up and say, "I think I'll buy a series of chemo treatments today." Rather, you say you'll go in for a checkup, then your doctor claims to find a cancer, and recommends treatment.

Simply put, the system sketched in that article is sophomoric. Not surprising for an editor of an organ run by parasites, for parasites.

Liberal - The article you provided as being pro-public option is a 2005 article that points to the VA hospitals as being model examples. Are you aware of all the issues with VA hospitals. The Washington Post has been reporting on their problems since 2007. http://www.washingtonpost.com/wp-srv/nation/walter-reed/index.html

As far as a truly free market in health care, I would ask you to reconsider your position. It is first most important to realize that what we have now is not a free market. The current system has been set up through regulations and the tax code as a gift to big business at the expense of the average Joe. We don't have health insurance at all. We have subsidized medical funding through our employers (if your lucky enough to get it). The system allows the big corporations to make out like bandits (and our government has put it in place at the behest of corporate donors). Here's a great article that explains our current system and why it can't work (even with a public option): http://independent.org/publications/tir/article.asp?a=740

The CNN Money article I provided is difficult to comprehend (not because of any astute presentation), but because it requires one to reconsider health care entirely; to look at it with a clean slate.

Under the system described in the article, for everyday health care needs people would pay out of pocket. As such, doctors and hospitals would compete for business (there is no such competition now). Lasic eye surgery is a good micro-comparison. I realize that the surgery is elective, but that just means that not everyone has to have it. But, not everyone needs a hip replacement, or triple bypass surger, or etc. Basically, all health care becomes more affordable.

For the catostrophic diseases/injuries, we would have insurance. Like car insurance, there would be a high deductible. Once the deductible is reached, the insurance company would pick up the bill.

That's just a quick synopsis on the idea. There's plenty more material available on it.

I realize that it's not perfect, but nothing will be. There is a role for government and charities to assist those that are less fortunate. But, those are a small minority in our great country.

I don't feel that the current plan(s) being discussed truly get to the root cause of our problems. Health care for all means increased demand. With a limited supply of health care resources, either the cost has to rise or the availability has to fall. That's basic supply/demand theory.

Ben wrote, The article you provided as being pro-public option is a 2005 article that points to the VA hospitals as being model examples. Are you aware of all the issues with VA hospitals. The Washington Post has been reporting on their problems since 2007.

So what? Private hospitals don't have problems? And VA hospitals are running with much less money than private hospitals.

It is first most important to realize that what we have now is not a free market.

I know that, and it's irrelevant. The fact there can be no rational free market in health care, due to the market failures outlined in the article about the VA. My point in citing that article wasn't to say "government run health care good". Rather, it's that it's impossible to design a market in health care with the proper incentives, because (a) "rational" means "value is in long-term outcomes," yet a given insurer and/or provider cannot capture the benefit of those outcomes because the patient will likely have moved on to other insurers and providers.

As such, doctors and hospitals would compete for business (there is no such competition now). Lasic eye surgery is a good micro-comparison. I realize that the surgery is elective, but that just means that not everyone has to have it. But, not everyone needs a hip replacement, or triple bypass surger, or etc. Basically, all health care becomes more affordable.

Nope. Because a competitive market leads to cheaper prices only under conditions of near perfect information. Since providers are the ones making the choices, not the patients (and I daresay even the providers have pretty bad information), the market will fail.

For the catostrophic diseases/injuries, we would have insurance. Like car insurance, there would be a high deductible. Once the deductible is reached, the insurance company would pick up the bill.

(yawn) Yet another one of my points that you didn't address---a huge fraction (perhaps more than half) of the costs are for very expensive care (like end-of-life treatments). Since those are being picked up by insurance, the benefit of consumers shopping for price (which is illusory anyway, as I show above) isn't present.

Health care for all means increased demand. With a limited supply of health care resources, either the cost has to rise or the availability has to fall. That's basic supply/demand theory.

Wrong again. Private ensurers provide no value whatsoever (essentially, they're collecting economic rents). Getting rid of them saves 20% of costs. And studies have shown that about 1/3 of medical costs are for treatments that are either harmful, ineffective, or not cost-effective. If we have a rational, planned system (yes, top down), we can eliminate those costs.

Those savings are more than enough to insure everyone.

Ben wrote, Here's a great article that explains our current system and why it can't work (even with a public option): http://independent.org/publications/tir/article.asp?a=740

LOL! That looks like a libertarian site.

Aside from their very good stuff about military matters and foreign policy, as a libertarian outfit, their stuff is nonsense.

Why? Because some true libertarians ("geolibertarians") have pointed out that most so-called libertarians are quasi-feudalists and ardent foes of liberty.

Liberal - Your argument for government run health care is that even though it's wrought with the same problems (which isn't true, the problems are much, much worse; and you're being dishonest to say otherwise), at least it's not in the hands of greedy capitalists? Sounds like there's a spot in Obama's administration for you.

The arguements made in the article you provided are predicated that VA hospitals are in great shape and models of efficiency. That's the furthest from the truth so the article has no merit. It also compares today's private health care with a free market, when I've already made the point that it is the furthest thing from a free market.

A quote from your article: "As a private practice physician, he got paid for treating patients, not for keeping them well or helping them recover faster." - This only bolsters my position that there is no free market. Your article essentially argues why the current health care system can't work. I agree with that.

You said: "Because a competitive market leads to cheaper prices only under conditions of near perfect information. Since providers are the ones making the choices, not the patients (and I daresay even the providers have pretty bad information), the market will fail." - I have to ask if you've even been reading what I've been writing. Insurers would play less and less of a role in a truly free market. Insurance policies would stay with people, and there would be no employer involvement at all in a free market system.

And on your last point, I can tell you're a socialist because you never even addressed my simple illustration of supply and demand.

I know one thing, I would love to live in a mythical world where you could eliminate all insurance companies and replace it with a government bureaucracy that is so efficient it's like it doesn't exist. You do the math on that one.

I am a libertarian, and the one point I would hope we could agree on about health care (the one you haven't addressed yet), is that the government you cherish so much (the one you want to "fix" everything) is the same one that has worked with big business to give us the system we have today. That's the only point I'd like you to address.

I am a libertarian, and the one point I would hope we could agree on about health care (the one you haven't addressed yet), is that the government you cherish so much (the one you want to "fix" everything) is the same one that has worked with big business to give us the system we have today. That's the only point I'd like you to address.

This is a human rights issue. The health cartel that operates as a private tyranny within the free market hasn't delivered these essential rights. Therefore your contention that big government colludes with private power (which is 100% correct) is an important point but doesn't warrant that a public and democratized option shouldn't exist for human beings living in the U.S.

Taibbi hit a home run on the Taibblog.

http://trueslant.com/matttaibbi/2009/08/17/key-feature-of-obama-health-plan-may-be-out-washingtonpost-com/#more-681

So you recognize that the health care cartel utilizes the government's power to minipulate the market. That in fact proves that what we currently have is not a free market at all.

I'd suggest you read this article that explains the distinction between market entrepreneurs and political entrepreneurs: http://mises.org/story/2317

Here's a good video by the author of the above article: http://www.ustream.tv/recorded/1884327

Government ALREADY sets the standards for all compensation - to providers and to hospitals. Private insurers start with the MEDICARE payment structure as their baseline.

Private insurance structure is this: Money comes from individual people and goes to hospitals or providers. Of course Medicare is relevant - it sets the compensation for half of the equation!

Why is this deliberately overlooked?

I agree that the gov sets compensation standards. More proof that we don't have a free market system. So, people need to be open to the idea of a free market in health care (as laid out in the original article I posted: http://money.cnn.com/2009/08/14/news/economy/health_care_solution.fortune/index.htm?postversion=2009081410

More government manipulation is not the answer.

A completely free market in healthcare can't cover everybody because of two things, because of the size-distribution of income, and because it cannot control collusion in the natural oligopoly. That's economics. It's not the same thing as the market for corn because the size of the individual good in medicine is a lot larger and more complex. There's also the not-so-little fact that it's easy to choose what to eat, but deciding upon a healthcare plan and keeping abreast of developments which might change it, indeed possibly to your detriment, introduces large costs in personal time and energy of attention for the consumer to stay covered: transaction costs. Indeed it has been a time-honored way for the insurance industry to squeeze you out of money. Deregulation wouldn't change this part; quite the reverse. As economics teaches, the way to reduce transaction costs is by an institution. An institution can have market components for sure. The best thing would be to have a public option of universal basic coverage, so people can CHOOSE a plan without having some of their money ripped off by the private insurers. Ripped off, we should continue, for no value added. You can still buy private insurance if you want, for extra coverage beyond the basics. But a public option of universal coverage accomplishes two things at once: covers more people for less money per person, without introducing new transaction costs, and reduces long-term medical costs by self-chosen rationing, since it would be known as a baseline coverage system. It lets people CHOOSE.

End the Medicare subsidy for private insurers, and then you guys won't be able to claim with any credibility at all that the government is increasing prices.

In the history of anti-trust, you can't find one case where the government or a consumer group went after a business for raising prices. Anti-trust has been used by less efficient businesses to stay in business. That's a fact.

To say that you have to understand how the healthcare industry works to know how to buy health insurance is like saying you have to know how cars work in order to by auto insurance.

A market is a market is a market. What we currently have is not a free market. So saying that it can't work is disingenuous.

Did you read anything that I wrote above? About how we don't have an actual free market. Did you read the article on Monopoly, which clearly lays out the reality of monoplies based on historical fact? I think you need to do a little more HW.

Did you read anything that I wrote above? About how we don't have an actual free market. Did you read the article on Monopoly, which clearly lays out the reality of monoplies based on historical fact? I think you need to do a little more HW.

"So saying that it can't work is disingenuous."

No, it is stating historical fact. If it could have worked as a free market, it already would have. It would be like the markets for food or for consumer electronics. It isn't. It's different.