Medical Costs in the USA

(In which I discover what most health care economists knew all along.)

The basic reason we have a cost problem, as far as I can see, is insurance companies, which are financial companies whose whole business is maximizing profit, make a profit from providing care. There are therefore enormous incentives to overtreat and treat in the most expensive ways. This spreads through the whole system. All the health care providers: the doctors, the hospitals, the pharmaceutical companies, come to expect high returns from their work, and expensive practices drive out frugal.

I am haunted by this article: Why I Had to Close My Preventive Healthcare Clinic. There was a lot that went wrong for Dr. Charlap, but this concluding remark stands out: "It takes a very long time to get a thorough history and do a good exam and almost no time to prescribe a medication for a presumed illness. I chose the former. Insurance pays for the latter." And makes more money from it. Keeping people healthy does not pay as much as keeping them chronically ill.

All the cost control efforts I am aware of focus on getting doctors to accept less for treatment, and do nothing to resolve the perverse incentives in the rest of the system and, especially, the conflict between insurance company profits and cost-effective health care.

Oklahoma, Michigan, Wisconsin, … Greece?

Every now and again we hear that "The United States will turn into Greece," a country with massive debts it is unable to pay. Well, how did Greece get there?

1. Massive tax evasion by its rich.
2. Government spending without regard to debt.
3. Losing control of its currency.
4. Punitive economic policies by the coalition of the European Committee, the European Central Bank, and the International Monetary Fund—the infamous troika.

Is the USA subject to any of this? No, actually, though tax evasion by wealth is a thing and may get to be a bigger thing. But the states of Oklahoma, Michigan, and Wisconsin are. Oklahoma, thanks to tax-cutting without comparable spending cuts, is insolvent, and Michigan and Wisconsin are headed there and no US state has its own currency. The national Republican Party supports cuts in the national social insurance programs, without those programs, matters would be much worse in all of those states; there is I suppose, a parallel with the Euroausterians.

So there's the story: the right wing of the Republican Party wants to turn the USA, or at least as many states it can control, into Greece.

Croak!

Euroaustery: Maybe Some Progress

“It is better to be a live jackal than a dead lion, for while there is life there is hope.” And so there is still hope here. The big news here, I think, is that both sides seem want to reach some sort of not-disastrous deal.

Personalities and realpolitik, I think, are the questions here. I don’t believe that the IMF has suddenly turned wholeheartedly Keynesian, personally; my impression is that it’s more a matter of it being easier to vote for things one knows is not going to pass. It is also hard for me to believe that someone as authoritarian as Schäuble has in fact turned over a new leaf. Still, with luck, the members of the troika will end up pointing at each other, providing the plausible deniability for an easing of austerity.

(Originally posted in comments at Crooked Timber.)

Euroausterity in Greece

The Eurozone leadership isn't moving an inch. Why, what could possibly go wrong?
(Cue cheesy music…)

The stupid! It burns!

The Great Depression in Germany…

…ended in Naziism, not in a New Deal. I wonder if this shapes their attitude towards economic policy. The Depression seems to have been erased from their cultural memory, replaced by the hyperinflation the German leaders imposed on the country. They have no cultural memory of the New Deal working, no WPA, no CCC.

Kraw?

The Guardian's Ian Traynor on Austerity and Greece

She may be more associated with its horrors than any other politician in Europe, but Angela Merkel hates austerity. The word, that is. The crisis gave German the ugly term Austerität. When the German chancellor pronounces it, she wrinkles her nose in distaste, affects incomprehension, seeks distance from it. Sparsamkeit, or thrift, is more her thing. Merkel sees that as an old-fashioned household virtue, which she has elevated into national and European policy. But when it comes to the formula that Europe needs most of all, Merkel’s magic word is “competitiveness”. The belt-tightening, in Greece as almost everywhere else, is but a means to that end…

The results in Greece are a society traumatised, elites untouched and taking their money out of the country, no jobs for the young, national output shrunk by a quarter, national debt soaring to levels where it can only be serviced by sacrificing any prospect of recovery. Five years into what in Brussels is dubbed “the programme”, Greece is not competitive. It has the EU’s first government of hard-left rebels and rightwing antisemitic nationalists…

“I never discuss economic policy with Germans,” jokes a senior eurozone official in Brussels, “because for them it’s not about economics, it’s religion.”—The Guardian

By this account, it appears that Germany is the leader in European austerity; they are persuaded by Lutheranism and the prophets of the profits. But, also, the German position is not a bluff and it is popular in Germany. They might be willing to destroy the European Union, rather than give Greece a bailout.

Greece: German Religious Fanatics and No Revolution

• 100,000+ protesters in the streets of Madrid
• Syriza takes power
• German Chanceller Angela Merkel takes hardline stance, French President François Hollande offers support. So much for the French left.

"History does not repeat itself, but sometimes it rhymes." - (?) There's lots of rhymes here. I am reminded of the mid-19th Tories, who starved the Irish. Merkel and the Euro-austerians are the same kind of inhuman fanatics, just as much fanatics as any pulpit pounding Fundamentalist. The morality of the Merkel's Christian Democratic Union is grounded in the same Lutheranism (NYT article, worth a read) so influential on the US right. Angela Merkel is herself the daughter of a Lutheran convert pastor, a man so devout he moved his family to East Berlin to evangelize the Communists. Because of this childhood, she is likely to personally dislike any socialist faction. In 2012, Merkel said, “Christianity is the most persecuted religion in the world." (Link to Christian site that agrees.)

Now, the Lutheran ideal of charity is a curious thing. Martin Luther advocated giving the poor loans from a chest of contributions to get them back on their feet. Good, as far as it goes, but how when the poor cannot repay? How when everyone is poor and cannot contribute enough? This is apparently how Merkel and Germany regard Greece. Merkel and her austerians know that Greece could not repay, that indeed no nation of the European Union, including Germany itself, can repay its loans, without bringing in money from outside. Hence the statement of a German official that every country in Europe must run a positive balance of trade, like Germany. Only who are they to trade with? Every nation cannot run a positive balance of trade!

Merkel's combination of "grew up in East Berlin" and devout Lutheranism makes it unlikely that the German Christian Democratic Union party will accept any deal with Greek leftists, no matter how much sense such a deal makes. The atheism of Greek Prime Minister Alexis Tsipras may also weigh against the Greeks, as its majority Eastern Orthodox church. For this reason, I believe, the Greeks will have no success in their negotiations until the German government falls and a government more in touch with reality comes to power. This will be very hard. The Germans have internalized false beliefs about economics, and will not easily set them aside. Syriza also faces hard opposition in its own country: neither wealthy Greeks nor the Church of Greece will be easily persuaded to pay their fair share of taxes.

…and what of Spain and Italy? It is striking how much this is a conflict of Southern and Northern European Christian morality, despite the atheism of the Syriza leadership. I worry that the atheists of Syriza's leadership may not realize they are facing fanatics, and try to negotiate when this is not possible. It does seem to me that there is a real possibility that the austerians will win.

(Revised to add information on Merkel's family background and speculations about her likely attitudes towards Greece and Syriza.)