CBO: Obamacare costs revised downward, again. Finds lower than expected premiums.

[ehcks]

It will come from where all money comes from - a few keystrokes at the Federal Reserve. You do realize that money isn't something we have to dig out of the ground, right?

Your solution to excessive medical care costs is intentional hyperinflation.

Good work.

 

[sunmaster14]

I am also intrigued by the idea that your proposal to reduce costs is to annually spend an additional $200B to be spent on healthcare and an extra $800B just given to everyone. (about 200-million adults multiplied by $1k, for medical expenses, and $4k free money), which even if it does work on reducing the 20% of costs that it targets*, does nothing for the 80% of costs that it doesn't.

That is going to have a significant effect on governmental finances, as well as on the wider economy.



*Very poorly, and with no expectation in conventional economic theory that even significant amount of that 20% will be reduced by free market forces, and certainly not by much.

I'm not sure why you insist on giving your entirely wrong calculation, when I have already shown you a correct one. In the above, you are doing a lot of double counting of money the government is already spending (directly on healthcare, by the way, which is where, unlike almost every other area of the economy, we have too much demand relative to supply).

Also, we strong negative feedback built into the economy. Extra money added to the system by the federal governent either is saved, in which case, there is no increase in aggregate demand, or it contributes to extra economic activity which generates taxable income which then takes money out of the system again in the form of higher tax revenues. The tax regime we have, by accident probably, is steeply progressive and generates revenues that rise superlinearly with both economic activity and inflation.

 

[sunmaster14]

Yet more evidence you are clueless about economics.

Is that supposed to be an argument? That's even less persuasive than Emily's appeals to authority.

 

[sunmaster14]

Your solution to excessive medical care costs is intentional hyperinflation.

Good work.

My solution shifts aggregate demand away from the health care sector (where there is too much relative to supply) and towards other sectors of the economy (where there is too little demand relative to supply). In any case, as I explained above, there is little danger of even unwanted inflation, let alone hyperinflation. Hyperinflation is basically impossible in an economy unless there is a catastrophic drop in productive capacity or the vast majority of liabilities are indexed to the inverse value of the currency.

 

[sunmaster14]

Sunmaster14,

I have said that your proposal seems ill thought out. For example, I pointed out that providing catastrophic coverage above $5k meant that those people had no incentive to shop around (rightly I think).

That's no worse than the system we have now.

You then said that there are ways of ensuring that they have considerable "skin in the game" without specifying what.

In a later post, you mention co-insurance, and later suggest that this isn't a new modification of your proposal.

Co-insurance (consumer is responsible for a percentage of his costs) is pretty much the only sensible way to give people skin in the game. Co-payments (consumer is responsible for a fixed charge per claim, regardless of the cost of the claim) are kind of stupid.

What fraction of the cost should someone on dialysis bear? At a current annual cost of about $80k, few households would be able to afford more than a small fraction of that. Add in the reduced earning potential due to the illness and it gets even worse.

20% is a good number, but you could always means-test it (by net worth, not assets). Could be higher for wealthy people, lower for poor people. For Medicaid, it is 0%, so we already have that now.

Why should they be required to shop around on any basis other than the most medically appropriate treatment?

Because everything in life is a tradeoff. I don't think you're entitled to sponge $1 million of services from society just because you're sick. If you have the means to pay for it yourself, fine. If you can convince friends and family to pay on your behalf, fine. If you can create a convincing sob story to get money on gofundme.com, fine. We're rich enough as a society to provide everybody with a guarantee of pretty good health care, but not state-of-the-art health care. That's pretty much a tautology.

 

[jimbob]

I'm not sure why you insist on giving your entirely wrong calculation, when I have already shown you a correct one. In the above, you are doing a lot of double counting of money the government is already spending (directly on healthcare, by the way, which is where, unlike almost every other area of the economy, we have too much demand relative to supply).

Also, we strong negative feedback built into the economy. Extra money added to the system by the federal governent either is saved, in which case, there is no increase in aggregate demand, or it contributes to extra economic activity which generates taxable income which then takes money out of the system again in the form of higher tax revenues. The tax regime we have, by accident probably, is steeply progressive and generates revenues that rise superlinearly with both economic activity and inflation.

Your "correct calculation" suggests a net cost of only $0.87-trillion, as opposed to my quick estimate of $1-trillion. Given all the uncertainties, I say that that is "close enough for government work". You haven't added in any administrative costs - you still have to validate what the first $1k per person is spent on, and what catastrophic cover would be etc.

It would cost about a trillion dollars.

<snip>
So, you're talking about an extra 224 million x $5K of outlay, netted with the tax subsidy, which is about $250 billion. So maybe you're talking about a net increase of spending in the range of $870 billion. Of course, a lot of that comes back in the form of taxes on increased economic activity, as well as lowered prices for health care which means lower spending for Medicaid and Medicare. So, the economic stimulus is material in an $18 trillion economy, but nothing that would cause inflation I think.

 

[jimbob]

Because everything in life is a tradeoff. I don't think you're entitled to sponge $1 million of services from society just because you're sick. If you have the means to pay for it yourself, fine. If you can convince friends and family to pay on your behalf, fine. If you can create a convincing sob story to get money on gofundme.com, fine. We're rich enough as a society to provide everybody with a guarantee of pretty good health care, but not state-of-the-art health care. That's pretty much a tautology.

If no other country could manage it, then you might have a point, but a smaller proportion of my taxes goes towards healthcare than yours. A larger proportion of my taxes goes towards *my* healthcare than your taxes go towards your healthcare.

 

[sunmaster14]

If no other country could manage it, then you might have a point, but a smaller proportion of my taxes goes towards healthcare than yours. A larger proportion of my taxes goes towards *my* healthcare than your taxes go towards your healthcare.

Your system rations health care by government bureaucrats and by queue. A free market system would ration health care by willingness to pay, i.e. by price. The latter system is better because, it maximizes utility while at the same time encouraging the optimal balance of supply and demand.

 

[sunmaster14]

Your "correct calculation" suggests a net cost of only $0.87-trillion, as opposed to my quick estimate of $1-trillion. Given all the uncertainties, I say that that is "close enough for government work". You haven't added in any administrative costs - you still have to validate what the first $1k per person is spent on, and what catastrophic cover would be etc.

It would cost about a trillion dollars.

Administrative costs would almost certainly be less under my plan. The vast majority of health care transactions fall into the $0-$5,000 range, and neither the government nor the insurance companies would be involved in those at all (unlike the situation now). As for the refunding of the balance of the $1K not spent, that's a hell of a lot easier than filing a tax return. In fact, it could be a part of the tax return.

 

[DavidJames]

I've often pointed out the religious like beliefs some have in capitalism. sunmaster14's plan is a great example of how it can play out. In this case, the government is giving each of us $1000 to put in the donation plate of whatever "church" we choose.

 

[jimbob]

Administrative costs would almost certainly be less under my plan. The vast majority of health care transactions fall into the $0-$5,000 range, and neither the government nor the insurance companies would be involved in those at all (unlike the situation now). As for the refunding of the balance of the $1K not spent, that's a hell of a lot easier than filing a tax return. In fact, it could be a part of the tax return.

Refunds for receipt checking is not going to be simple.

ETA: It would still cost about a trillion dollars by your own admission. And be massively inflationary.

 

[Blue Mountain]

Is that supposed to be an argument? That's even less persuasive than Emily's appeals to authority.

Not an argument; a comment. Your comment implies that the Federal Reserve simply creates money out of thin air. That's verging on crackpot economics at the level of Above Top Secret or the gold-bugs.

 

[jimbob]

We're rich enough as a society to provide everybody with a guarantee of pretty good health care, but not state-of-the-art health care. That's pretty much a tautology.

And your solution to reducing the costs is to add (by your own calculations) $0.87-Trillion to a budget that is currently 3.7-trillion.

Nope, not a good idea.

 

[sunmaster14]

Not an argument; a comment. Your comment implies that the Federal Reserve simply creates money out of thin air. That's verging on crackpot economics at the level of Above Top Secret or the gold-bugs.

Say what? Of course the Federal Reserve simply creates money out of thin air. So do private banks actually, although it's a slightly different kind of money, and they may eventually have to back it up with the Federal Reserve kind of money.

 

[sunmaster14]

And your solution to reducing the costs is to add (by your own calculations) $0.87-Trillion to a budget that is currently 3.7-trillion.

Nope, not a good idea.

The problem is health care costs, which my proposal addresses. Not the budget deficit or the national debt per se. In fact, we almost certainly have too low a budget deficit right now, as demonstrated by what appears to be a faltering economy.

 

[jimbob]

The problem is health care costs, which my proposal addresses. Not the budget deficit or the national debt per se. In fact, we almost certainly have too low a budget deficit right now, as demonstrated by what appears to be a faltering economy.

I agree that it wouldn't do anything for healthcare, but you seem to think it would.

An increase in the US government budget of nearly a quarter would have *significant* effects on the US economy.

It might be a short term stimulus, but there would be a significant inflationary pressure, US Government bond yields would need to rise, the dollar would be depressed, and if it stops being the World's reserve currency, it would make US government borrowing even more expensive. Interest rates would need to rise, so you wouldn't gain much at all.

So yes,

Those are the obvious implications, which don't require much knowledge of economics to predict.

ehcks's comment about hyperinflation would also be a real possibility - I lack the knowledge to say how likely that would be.

And all this to address only 20% of healthcare costs. I don't think this is a good idea.

 

[sunmaster14]

I agree that it wouldn't do anything for healthcare, but you seem to think it would.

An increase in the US government budget of nearly a quarter would have *significant* effects on the US economy.

It might be a short term stimulus, but there would be a significant inflationary pressure, US Government bond yields would need to rise, the dollar would be depressed, and if it stops being the World's reserve currency, it would make US government borrowing even more expensive. Interest rates would need to rise, so you wouldn't gain much at all.

So yes,

Those are the obvious implications, which don't require much knowledge of economics to predict.

Or any knowledge apparently.

There is no basis to believe that there would be significant inflationary pressure. Household net worth in the US is about $87 trillion. An extra $870 billion of monetary wealth, minus the substantial extra tax revenues that will generate, is a drop in the bucket (<1% growth per year). And of course, the right number to compare it against is the household net worth of the world, since the dollar is the savings vehicle of choice for most everybody.

US deficits are running about $500 billion per annum, or about 2.8% of GDP. Doubling that would not create significant inflation, and would probably be highly beneficial given the increasing propensity of the US (and the world at large) to save in dollars, which saps aggregate demand.

And what you say about interest rates is simply wrong. The Federal Reserve has plenary power to set the short-term interest rate, and long-term interest rates will simply be the integral of the expected short-rate over time. Interest rates really have nothing to do with inflation, unless the Fed makes it so (which it shouldn't since monetary policy has little effect on the real economy - fiscal policy is the whole game). As for the value of the dollar? It will do what it will do. Doesn't matter terribly much There are so many negative feedback mechanisms built into the system that the dollar will remain relatively stable, as long as the government, and the taxing regime, is stable.

The important point, however, is that it is optimal and efficient use of real resources that matter. Money is a tool to make that happen, but it is not a resource in and of itself. If we can mitigate the waste in health care resources, we'll all be better off.

ehcks's comment about hyperinflation would also be a real possibility - I lack the knowledge to say how likely that would be.

It's a silly worry.

And all this to address only 20% of healthcare costs. I don't think this is a good idea.

Well, I claim that it addresses all of health care costs. The 20% gets the ball rolling on price transparency and gets people used to being cost-conscious health care consumers.

 

[jimbob]

Or any knowledge apparently.

<snip>

And what you say about interest rates is simply wrong. The Federal Reserve has plenary power to set the short-term interest rate, and long-term interest rates will simply be the integral of the expected short-rate over time. Interest rates really have nothing to do with inflation, unless the Fed makes it so (which it shouldn't since monetary policy has little effect on the real economy - fiscal policy is the whole game). As for the value of the dollar? It will do what it will do. Doesn't matter terribly much There are so many negative feedback mechanisms built into the system that the dollar will remain relatively stable, as long as the government, and the taxing regime, is stable.
<snip>

Well, I claim that it addresses all of health care costs. The 20% gets the ball rolling on price transparency and gets people used to being cost-conscious health care consumers.

Interest rates and inflation are inextricably linked in most economic situations in the Western World

 

[sunmaster14]

Interest rates and inflation are inextricably linked in most economic situations in the Western World

Which interest rates would those be? Short-term, intermediate term, or long-term? Because they don't always move in the same direction. And which countries do you have data for?

 

[Emily's Cat]

It will come from where all money comes from - a few keystrokes at the Federal Reserve. You do realize that money isn't something we have to dig out of the ground, right?

Wow. Um... I don't even know how to address this.