Coyote Blog

Our Overwrought language award this week comes from Kevin Drum of Mother Jones, writing about Paul Ryan's budget plan.  Drum calls Ryan's budget a "Vision of a Dickensian Hellhole".  He quotes Jonathon Chait as saying, "Its enactment would amount to the most dramatic rollback of government since the New Deal."

All this for a budget that proposes to reduce government spending to about 19% of GDP, a level that we have not seen since the Dickensian Hellhole of ... the Bill Clinton Presidency.  During the New Deal, spending hovered around 10% of GDP.

This is the ratchet effect that big government lovers are so adept at employing.  Under President Obama (with a lot of help from George Bush and a Democratic Congress) spending has skyrocketed to an unprecedented-except-in-WWII level of over 25% of GDP.  But suddenly Drum and Chait and company want to define that level as the new baseline, below which any drop is now "Dickensian."  Which is another reason that we should never, ever create a new government spending program because once established they are impossible to eliminate, no matter how stupid and wasteful.

Only a mostly-statist world would consider Paul Ryan a libertarian.

Also, here is my growing Romney fear -- that this guy shares many of the same assumptions as President Obama about the government's role in top-down management of the economy.  So far, his rhetoric has the feel not of seeking freedom from state authority but instead that, in the context of top-down state authority, he will be the better, smarter manager.  In other words, we are doomed.  Which is about the way I sum up every Presidential election.

Paul Ryan is catching grief for his proposal to convert Medicare from "all the medical care you wish to consume" to grants of $X per year.  This seems unimaginable to people (forgetting for a moment that the US functioned for nearly 200 years without it at all).

But what if Social Security were Medicare.  What if, instead of giving $X per year, Social Security made an open-ended promise to fund whatever consumption one thought necessary to maintain his or her lifestyle.  Can you imagine the fiscal disaster?  The horrible incentives

And if Social Security had been structured that way, and we were now trying to change it to fixed grants, what would people be saying?  They would say, "what if something unexpected happens - won't that just leave people in the cold?"

I have written a ton in the past on what I consider the fundamental problem in health care:  The taking of price-value tradeoffs out of the hands of consumers, first through encouragement of first-dollar employer plans and now through a Federal government takeover.  For example:

The computer keyboard I am typing on right now costs about $55 on Amazon.com.  Is that a fair price?

At some level, the answer must be “yes.”  Why?  Because I bought it – simple as that.  No one was compelling me to buy this particular model, so if I thought the price too high or the features too skimpy, I would have just passed on the purchase.  If I desperately wanted or needed a keyboard, I might have bought one of literally hundreds of others for sale at Amazon, priced from a low of $1.49 (used) to a high of $2400 (I kid you not).  After shopping through the various options, I chose my keyboard as the best match, for me, of price and features.

For decades, this seemingly prosaic act of individual “shopping” has been steadily eroded in health care with the growth of third party payers, particularly Medicare.   How much did you pay for you last doctor visit?  Your last x-ray?  Your last blood test?  Believe it or not, it is still possible to price-shop medical care — I do it myself, because I have a high deductible health insurance plan under which I pay all but the most bankrupting bills out of pocket.  As an example, three x-rays last month of my son’s ankle would have been billed to my insurance company at over $100, but I asked for their cash price and they pulled a separate book from a hidden place under the counter and quoted me $35.  I got a 70+% discount merely for caring about the price.

But my health plan, which includes this seemingly positive incentive to shop, will soon be illegal as high-deductible insurance plans, as well as medical savings accounts, are effectively banned.  Under Obamacare, virtually all individual payments for medical products and services will cease — the government and a few large, highly regulated insurers will pay for nearly every visit, drug, or procedure.  The government will be making price-value trade-offs for our care, and they will be doing it incredibly imperfectly, because by eliminating individual shopping they have cut off a, excuse the pun, priceless source of information.

And here:

If we are all forced to have the same, low deductible, first-dollar health plans, what incentive is one going to have to stay out of the health care system, even for something minor?  What is to stop you from going to the doctor every day because you are hypochondriacal, or you are lonely, or bored, or just because you want to save on buying your own subscription to Highlights Magazine?  The buffet will be open and everything will be essentially free – what’s to stop people from gorging themselves?

You might say that you are more responsible than that, and perhaps you are.  But think about this:  Twenty years ago we used to all complain about the 2 or 3 pieces of junk mail we might find a day in our mailbox.  That was when the each piece of mail cost real money to send.  Today, junk mail in the form of email is essentially free to send.  How many pieces of junk mail do you get today?  Even if you are not hitting the system up for free health care, you know someone else will be spamming the system, and eventually all of us as taxpayers will have to pay for it.

The only way to stop this behavior is for the government to create a department of “No” to head off this behavior — what Sarah Palin so famously called “Death Panels.”

Both Tyler Cowen and Megan McArdle discuss individual vs. the government in making price-value tradeoffs for health care in the context of Paul Ryan's proposal to voucherize Medicare.

McArdle:

Expect there to be a lot of angry back and forth over this in the next week or so.  But one thing to keep in mind is that this Medicare plan is not effectively very different from what the Democrats claim ObamaCare is going to do:  which is to say, cap the amount of money spent on providing health benefits to those who are not rich enough to opt out of the public system.  The Democrats want to do so by having a central committee of experts decide what our health dollars get spent on; the GOP wants to put those decisions into the hands of consumers.  But this is not an argument about who loves old, sick people more.  Both parties are promising to halt the rapid growth of government health care expenditures, which is definitionally going to fall hardest on old, sick people....

There are also the tradeoffs to consider.  It seems quite likely to me that vouchers are going to be better at controlling health care cost growth than a central committee.  Every committee decision that cuts off a potentially useful treatment (and I'm afraid it can't all be back surgery and hormone replacement therapy) will trigger a lobbying explosion from affected groups.  Each treatment is a decision with a small marginal cost to the taxpayer; it's in aggregate that they become expensive.  Which means that the congressional tendency is always going to be to override--and while there are supposed to be structural barriers against this in the bill, they aren't very strong . . . about like trying to quit smoking by hiding your cigarettes from yourself.