Paul Krugman reads some bedtime stories

[update 3/19/10: see additional comment below on medicaid privatization]

Krugman, of course, imagines that he is telling us the story of the Phoenix, a magnificent magical bird that immolates itself, only to rise up out of the ashes and live again, each time with a lifespan of 500-1000 years. So too with health reform in Krugman's world, or more accurately in the world that the rest of us live in, "health" "reform": the pending legislation had been pronounced dead but now appears to be reborn and rising from its recent funeral pyre.

Yay, just what we need, 500 more years of insurance companies.

I'm reminded more of Hamster Huey and the Gooey Kablooie [the story we are never told] and The Disembodied Hand [the story that uses clever trickery to scare the daylights out of the listener] but hey, we all cling to our favorite mythologies.

Krugman then goes on to recite, and debunk, three "myths" about "health reform" in an attempt to bolster the fortunes of the fledgling firebird.

PK on Myth #1:

The first of these myths, which has been all over the airwaves lately, is the claim that President Obama is proposing a government takeover of one-sixth of the economy, the share of G.D.P. currently spent on health.

He goes on to explain that between Medicare, Medicaid, government regulation of employer-provided insurance plans, the government has already taken over much of this portion of the economy, long ago, and now the federal government proposes to more strongly intervene in what is really a very small portion of this market: individual and small-group insurance plans.

In this, he is entirely correct. According to CBO's latest estimates on the Senate bill, by 2019 [if this version of the legislation passes] approximately 9 million people in this now wild-wild-west-ish market will be in the new, more regulated market. There's gonna be a new sheriff in town, and yes, it's even possible that these 9 million people will end up with better insurance than they have now. As he says at the end of his addressing myth 1: It’s this sector, plus the plight of Americans with no insurance at all, that reform aims to fix. What’s wrong with that?

Can't blame him for that, but if you're going to take aim at something, it does help to aim in the right direction. More on this in a moment, but remember this one number for now: 9 million.

Krugman can't win with this one.

Anti-government types are going to look at all that government-controlled health care that's already in place and see this as the last remaining "free" market being taken over by the government, and on the surface of things, they will be correct, although most of the rest of us realize that the purported "regulation" of the insurance markets will not be all that scary to the insurance industry. They have after all written the parts of the bill that will affect them, but because the Democrats are both stupid about messaging and venal when it comes to lining their own coffers with insurance industry largesse, they aren't going to be able to credibly convince people that this is NOT a government takeover of health care.

Single payer advocates otoh, look at this in dismay, because it does appear to be that the industry-bought government is taking over what is supposed to be working for the people: We the people, in order to form a more perfect union and all that jazz. Although Bernie Sanders assures us that there is language in the Senate bill that will allow states to set up their own single payer systems [and on this the Senate bill is better than the House bill], it's by no means guaranteed that the language will in fact be interpreted that way in the courts should states have the audacity to set out on their own. There's still the very real possibility of preemption [see here and here], where the courts try to divine the intent of the congress critters who passed a law. If the courts look into their clouded crystal balls and decide that yes the federal government did intend to take over some area of regulation from the states, then the states will just have to fall in line with what the federal government tells them to do. So if the federal government intends for all 300 million of us to buy crappy and poorly regulated private insurance, then yes, they can make us do that.

PK on Myth #2:

The second myth is that the proposed reform does nothing to control costs. To support this claim, critics point to reports by the Medicare actuary, who predicts that total national health spending would be slightly higher in 2019 with reform than without it.

Even if this prediction were correct, it points to a pretty good bargain. The actuary’s assessment of the Senate bill, for example, finds that it would raise total health care spending by less than 1 percent, while extending coverage to 34 million Americans who would otherwise be uninsured. That’s a large expansion in coverage at an essentially trivial cost.

And it gets better as we go further into the future: the Congressional Budget Office has just concluded, in a new report, that the arithmetic of reform will look better in its second decade than it did in its first.

Furthermore, there’s good reason to believe that all such estimates are too pessimistic. There are many cost-saving efforts in the proposed reform, but nobody knows how well any one of these efforts will work. And as a result, official estimates don’t give the plan much credit for any of them. What the actuary and the budget office do is a bit like looking at an oil company’s prospecting efforts, concluding that any individual test hole it drills will probably come up dry, and predicting as a consequence that the company won’t find any oil at all — when the odds are, in fact, that some of the test holes will pan out, and produce big payoffs. Realistically, health reform is likely to do much better at controlling costs than any of the official projections suggest.

Oh joy, we'll eliminate the Wild Wild West Insurance Markets and institute the Wildcat Well Theory of Cost Controls. Many of these projects center around the poorly-supported theory that people get too much care [yeah riiiight] and that we need to pay doctors and hospitals more money to give us less care, because that would be more efficient, you see. Just stop paying for sick people! Saves a ton of money.

As for "nobody knows", that sure seems to be the phrase du jour these days huh? Krugman says that we don't know if any these proposed cost-cutting projects will work and that the CBO scored them conservatively [or not at all] because of this "nobody knows". The problem here is that many of these proposed measures have been tried already, with at best, mixed results. But hey, as long as "nobody knows" whether they'll work [work for whom?] we can hand out taxpayer money to people to keep their pet projects going.

But hey, for a trivial cost, we'll be providing health insurance to 34 million more people [31 million more, according to the CBO]! At least Krugman doesn't resort to calling this historic or progressive, but just how good a deal is that? Judging by Canada's example, 10 years after their "health reform" went national, they weren't spending a tiny bit more, but a great deal less. Of course, they achieved this by having the government directly impose price controls, rather than by experimenting with nudgy projects, but we're not Canadians [or Japanese, or French, or Swiss, or Dutch, or British, or ...] so we can't do the simple [and morally responsible] thing.

Remember the 9 million people from myth #1? According to the CBO [table 3, p11], they, along with 31 million people who would otherwise have been uninsured if we left the present system alone, will get their insurance either from the exchanges [25 million of them] or from Medicaid [15 million]. Still, if we only pay a little more than we are now, we're going to give subsidies to a lot of people so they can afford to buy insurance, and we're going to expand Medicaid too. Expanding a public program, what's so wrong with that?

Well, the premium subsidies are designed around Jonathan Gruber's analysis of "affordability" [Gruber being the architect of the oh-so-affordable Massachusetts plan we're going to go national with] which is this:

An item is clearly not affordable if no one in a group can afford it. But, by the same token, it is wrong to say an item is unaffordable if anyone in a group cannot afford it. In considering affordability for a group, we need to establish a sensible benchmark whereby insurance is considered affordable if “most of” a group can afford it. We can disagree about what “most of” means, but it would be wrong to define “most of” only as “very close to 100%.”

If we had single payer, funded by progressive taxation, then "most of" would actually mean "very close to 100%" but in Gruber's world, and therefore in Krugman's world, if only 21% of the population [see, it's even true in Vermont!] can't afford to get actual health care, even with insurance, then hey, it's "affordable"! Such a deal!

Medicaid has been a godsend for many people, but it is both means- and asset-tested, which translates to if you had any money saved up for retirement or sending your kids to college, you have to spend it all on your health care first before Medicaid will help you. Both conservatives and "progressives" are fond of pointing out that not everyone who is eligible for Medicaid is enrolled in Medicaid, and now you know why. Many a household has lived very frugally on a modest income and managed to save a very modest but important nest egg. Any rational person would not expect them to give that up just to get health care.

And yes, Medicaid was originally a public program. By 2004 it was 60% privatized, and in 2007 was 64% privatized. I don't think this can be considered a "public" program any longer. Expanding Medicaid to cover more people also means expanding the amount of taxpayer dollars we give to the insurance companies, so the bloodsucking parasites win all the way around.

PK on Myth #3:

Which brings me to the third myth: that health reform is fiscally irresponsible. How can people say this given Congressional Budget Office predictions — which, as I’ve already argued, are probably too pessimistic — that reform would actually reduce the deficit? Critics argue that we should ignore what’s actually in the legislation; when cost control actually starts to bite on Medicare, they insist, Congress will back down.

But this isn’t an argument against Obamacare, it’s a declaration that we can’t control Medicare costs no matter what. And it also flies in the face of history: contrary to legend, past efforts to limit Medicare spending have in fact “stuck,” rather than being withdrawn in the face of political pressure.

Contrary to legend, indeed. One of the past efforts to control Medicare spending that has "stuck" is the prospective payment system [aka DRGs] which in fact does appear to have coincided with a drop in Medicare spending. I haven't read up on this extensively and can't say one way or the other, but it's out there in the literature: not everybody believes that DRGs were the actual cause of the reduced spending. Meanwhile, even Krugman himself has reported on Congress' inability to rein in Medicare spending. The CBO, in scoring the various bill throughout this whole brouhaha, has made reference to this repeated inaction on Congress' part over the years, and said so in partial explanation of their conservative scoring on the possible savings.

This is a reasonable, responsible plan. Don’t let anyone tell you otherwise.

We're going to give bunches of taxpayer dollars to a hated industry that lives by denying sick people care, bunches of taxpayer dollars to researchers who want to prove that it's more efficient to give sick people less care, and we're going to ask millions of nearly-poor people to impoverish themselves in exchange for giving them more of this less-care. Yeah, that sounds reasonable and responsible.

So let me address three big myths about the proposed reform, myths that are believed by many people who consider themselves well-informed, but who have actually fallen for deceptive spin.

Dude, they got mirrors where you're from?