Sunday, June 4, 2017

NoahLogic

My little foray here into the blogosphere sometimes leaves me in slack-jawed amazement at the leaps of illogic in the commentariat.

Such was the case last week, when Noah Smith writing at Bloomberg.com, took on a recent post of mine about food stamps. 

My post was about food stamps, and about the language that people use to hide agendas in the policy debate. Scott Simon at NPR thought he had a big gotcha by repeatedly asking Congressman Adrian Smith "Is every American entitled to eat?" because the budget proposal reduces food stamp payments. The title was "single payer food," as it seemed Scott's view of food was like many people's view of health care. 

This sent Noah on a tear about "free market purists" who disdain "single-payer" health care:
In a recent blog post, Hoover Institute senior fellow John Cochrane likens single-payer health care to single-payer food:
...
by drawing an equivalence between health care and food, Cochrane is ignoring the long history of economic research showing that the health-care market is very different from others.  
Here I am left scratching my head. I did not, in fact, "liken single payer-heath care to single-payer food." I didn't mention health care at all. How can a post about food stamps "ignore" research on health economics? And if you spend 10 seconds googling you will find I have addressed all these arguments in other writing that is actually on this topic. You might not agree with my answers, but I don't "ignore" them.

A bit of advice to Noah: OK, you can't be bothered to do any real research before mounting a personal attack on  Bloomberg.com. But try to make it all the way through a blog post before writing a takedown.

(Or, back in the old days, before writing that "Cochrane is ignoring" something, basic journalistic ethics would demand that you contact Cochrane for comment, at which point Cochrane could point out that no, he is quite aware of Ken Arrow's work and has responded to it in detail, especially when actually writing about health care, not food. Or an editor or fact checker would require that. Some news media still practice this kind of basic journalistic ethics. Bloomberg, we see, does not.)

***

However completely unrelated to the subject at hand, though, Noah does bring up some interesting issues regarding health care. I'm grateful for the opportunity to rebut, because, as a matter of fact, I have written about health care,  and the attack gives me an opportunity to recycle some great old prose to prove that point.

The issue at hand: Can markets work for health care and health insurance? Noah:
There are so many problems with the health-insurance and health-care markets that it’s little wonder that they operate differently from the markets for food or cell phones. 
That's a misleading comparison. Health care is a complex personal service. The right comparison is lawyers, accountants, tax preparers, contractors, car repair shops, architects, gardeners, interior designers, bankers, brokers. These are all cases in which people deliver a complex service, and they know a lot more than we do. We hire their expertise as much as a product.

Health insurance is insurance. The right comparison is car insurance, home insurance, personal liability insurance, life insurance, disability insurance, and more complex insurance associated with businesses, such as director liability insurance, product liability insurance, freight insurance, and so forth.

All of these we generally leave to somewhat free markets. Nobody thinks there needs to be a single-payer contractor. (Well, maybe Noah does. I can't wait to see what kinds of bathroom tiles ContractorCare will pay for.) Just what is it about health care and insurance that have an essential market failure, and these do not?

Noah summarizes a 1963 Ken Arrow essay about health care, which Noah cites as research showing that markets cannot possibly work. The objections:
.. the importance of moral norms.  People have all kinds of moral considerations associated with health care. They expect doctors to act honestly and selflessly, and not just seek profit
Any time economists start telling you to pass complex regulations to enforce morality, run in the opposite direction. The Obama administration had something with the idea of "science-based" policy. At least let's get the cause and effect science right before we start making moral claims.

Let's read economists about economics:
...incomplete markets. Can people really know all of the possible health conditions they might get, including how much they would pay to cure or treat each one? ... The answer is certainly no. 
...uncertainty -- in health care, people don’t know what they’re buying until it’s already too late to make a different choice. Unlike food, which you buy over and over, open-heart surgery tends to only happen once.  
...adverse selection. People with health problems are more likely to try to buy health insurance; and since insurance companies know this, they have to charge everyone more. 
....moral hazard. After you’ve paid for insurance, the insurance company has every incentive to deny as many claims as it can get away with denying
These are all the standard objections to markets. They are all theoretical possibilities, echoed in every econ 101 textbook. But are they true of health care and insurance? And so much so that the evident pathologies of a government run system is better? (Remember, the free market case is not that markets are perfect. It is the long and sorry experience that governments are worse.) And are they so much more true than they are of all the above listed complex personal services, that the latter can be left to markets but a vast government bureaucracy must not only provide for all but outlaw the private option?

As it turns out, I have written about these things, in "After the ACA" easily available on my website and rather relentlessly promoted on this blog, especially p. 184ff,
B. The Straw Man 
...Critics adduce a hypothetical situation in which one person might be ill served by a straw- man completely unregulated market, with no charity or other care (which we have had for over eight hundred years, long before any government involvement at all), which nobody is advocating. They conclude that the hypothetical justifies the thousands of pages of the ACA, tens of thousands of pages of subsidiary regulation, and the mass of additional federal, state, and local regulation applying to every single person in the country.

How is it that we accept this deeply illogical argument, or that anyone making it expects it to be taken seriously? Will not one person fall through the cracks or be ill served by the highly regulated system? If I find one Canadian grandma denied a hip replacement or one elderly person who cannot get a doctor to take her as a Medicare patient, why do I not get to conclude that all regulation is hopeless and that only an absolutely free market can function? Both straw men are ludicrous, but somehow smart people make the first one, in print, and everyone nods wisely


C. Adverse Selection

We all took that economics course in which the professor shows how asymmetric information makes insurance markets impossible due to adverse selection. Sick people sign up in greater numbers, so premiums rise and the healthy go without. George Akerlof’s justly famous “The Market for Lemons” proved that used cars cannot be sold because sellers know more than buyers.

Yet CarMax thrives. Life, property, and auto insurance markets at least exist, and function reasonably well despite the similar theoretical possibility of asymmetric information. Life insurance is also “guaranteed renewable,” meaning you are not dropped if you get sick.

Is the story even true? Do most people, with knowledge of aches and pains, really know so much more about likely cost than an insurance company armed with a full set of computerized health records, actuaries, health economists, and whatever battery of tests it wants to run? Or is asymmetric information market failure in health insurance just a myth passed from generation to generation, despite functioning markets in front of our eyes?

Now the real world does see a big “adverse selection” phenomenon. Sick people are more likely to buy insurance, and healthy people forego it. But the insurance company does not charge people the same rate because it can’t tell who is sick or likely to cost more— the fundamental, technological, and intractable information asymmetry posited in your economics class. The insurance company charges the same rate because law and regulation force it to do so. The insurance company is barred from using all the information it has.

Regulation seems to feel that we have the opposite information problem; insurers know too much. The centerpiece of the ACA, after all, is banning the use of information, that is, preexisting conditions, not a great regret that insurers cannot tell who has preexisting conditions in order to charge them more.
 [Like many others Noah took both sides of this. People know more than doctors so the is adverse selection. Doctors know more than people so there are incomplete markets, and people can't shop.]
This source of adverse selection is the legal and regulatory problem, not the information problem of economic theory, and easily solved. If insurance were freely rated, nobody would be denied. Sick people would pay more, but “health status” insurance or guaranteed renewability solve that problem and eliminate the preexisting conditions problem.

Adverse selection due to fundamental information asymmetry in an unregulated market is, as far as I can tell, a cocktail-party market failure. It is a nice story, but does not quantitatively account for the real world. Furthermore, the ACA is not a minimally crafted regulation to solve the problem that people know more than their insurance companies can know about their health. Once again we are subject to the logical fallacy of accepting the entire regulatory structure because of one alleged failure
of a hypothetical free market.

D. Shopping Paternalism

Defenders of regulation reiterate the view that markets can’t possibly work for health decisions:

“A guy on his way to the hospital with a heart attack is in no position to negotiate the bill.”

“One point I cannot agree with is that competition can work in healthcare, at least as it does in other markets. I cannot fathom how people faced with serious illness will ever make cost- based decisions.”

“What about those who currently don’t have the background and/or the economic circumstances to consume healthcare, (e.g. take anti-hypertensive medicine instead of [buying] an iPhone)?”

Ezra Klein trying to understand why healthcare prices are so high and so obscure, writes:
"Health care is an unusual product in that it is difficult, and sometimes impossible, for the customer to say “no.” In certain cases, the customer is passed out, or otherwise incapable of making decisions about her care, and the decisions are made by providers whose mandate is, correctly, to save lives rather than money. In other cases, there is more time for loved ones to consider costs, but little emotional space to do so— no one wants to think there was something more they could have done to save their parent or child. It is not like buying a television, where you can easily comparison shop and walk out of the store, and even forgo the purchase if it’s too expensive. And imagine what you would pay for a television if the salesmen at Best Buy knew that you couldn’t leave without making a purchase." 
 [Noah is also not being particularly original!]
New York Times columnist Bill Keller put it clearly, in “Five Obamacare Myths:”
"[Myth:] The unfettered marketplace is a better solution. To the extent there is a profound difference of principle anywhere in this debate, it lies here. Conservatives contend that if you give consumers a voucher or a tax credit and set them loose in the marketplace they will do a better job than government at finding the services—schools, retirement portfolios, or in this case health insurance policies— that fit their needs.
I’m a pretty devout capitalist, and I see that in some cases individual responsibility helps contain wasteful spending on health care. If you have to share the cost of that extra M.R.I. or elective surgery, you’ll think hard about whether you really need it. But I’m deeply suspicious of the claim that a health care system dominated by powerful vested interests and mystifying in its complexity can be tamed by consumers who are strapped for time, often poor, sometimes uneducated, confused and afraid."

“Ten percent of the population accounts for 60 percent of the health outlays,” said Davis [Karen Davis, president of the Commonwealth Fund]. “They are the very sick, and they are not really in a position to make cost- conscious choices.”

Now, “dominated by powerful vested interests and mystifying in its complexity” is a good point, which I also just made. But why is it so? Answer: because law and regulation have created that complexity and protected powerful interests from competition. And is the ACA really creating a simple clear system that will not be “dominated by powerful vested interests?” Or is it creating an absurdly complex system that will be, completely and intentionally, dominated by powerful vested interests?

But the core issue is these consumers who are “passed out, or otherwise incapable of making decisions about [their] care,” “strapped for time, often poor, sometimes uneducated, confused and afraid,” and “not really in a position to make cost-conscious choices.”

Yes, a guy in the ambulance on his way to the hospital with a heart attack is not in a good position to negotiate. But what fraction of healthcare and its expense is caused by people with sudden, unexpected, debilitating conditions requiring immediate treatment? How many patients are literally passed out?

Answer: next to none. What does this story mean about treatment for, say, an obese person with diabetes and multiple complications, needing decades of treatment? For a cancer patient, facing years of choices over multiple experimental treatments? For a family, choosing long- term care options for a grandmother with dementia?

Most of the expense and problem in our healthcare system involves treatment of chronic conditions or (what turns out to be) end-of-life care, and involve many difficult decisions involving course of treatment, extent of treatment, method of delivery, and so on. These people can shop. Our healthcare system actually does a pretty decent job with heart attacks.

And even then . . . have they no families? If I’m on the way to the hospital, I call my wife. She is a heck of a negotiator. Moreover, healthcare is not a spot market, which people think about once, at fifty-five, when they get a heart attack. It is a long-term relationship. When your car breaks down at the side of the road, you’re in a poor position to negotiate with the tow-truck driver. That is why you join AAA. If you, by virtue of being human, might someday need treatment for a heart attack, might you not purchase health insurance, or at least shop ahead of time for a long-term relationship to your doctor, who will help to arrange hospital care?

And what choices really need to be made here? Why are we even talking about “negotiation?” Look at any functional, competitive business. As a matter of fact, roadside car repair and gas stations on interstates are remarkably honest, even though most of their customers meet them once. In a competitive, transparent market, a hospital that routinely overcharged cash customers with heart attacks would be creamed by Yelp.com reviews, to say nothing of lawsuits from angry patients. Life is not a one-shot game. Competition leads to clear posted prices, and businesses anxious to give a reputation for honest and efficient service.

So this is not even a realistic situation. To be sure, some conditions really are unexpected and incapacitating. Not everyone has a family. There will be people who are so obtuse they would not get around to thinking about these things even if we were a society that let people die in the gutter, which we are not, and maybe some hospital somewhere would pad someone’s bill a bit. (As if they do not now!) But now we are back to the straw man fallacy. Once again, the idea that ACA is a thoughtful, minimally designed intervention to solve the remaining problem of poor negotiating ability by people with sudden unexpected and debilitating health crises is ludicrous. As is the argument that we should accept the entire ACA because of this issue. 
Take a closer look at Keller and Davis’s statement: “strapped for time, often poor, sometimes uneducated, confused and afraid,” and “not really in a position to make cost- conscious choices.” We are talking about average Joe and Jane here, sorting through the forms on the insurance offerings to see which one offers better treatment for their multiple sclerosis or diabetes-related complications. If Joe and Jane cannot be trusted to sort through this, how in the world can they be trusted to figure out whether they want a fixed or variable mortgage? Which cell phone or cable plan to buy? To deal with auto mechanics, contractors, lawyers, and financial planners? How can they be trusted to
sign marriage or divorce documents, drive, or . . . vote?

We have a name for this state of mind: legal incompetence. Keller, Davis, and company are saying that the majority of Americans, together with their families, are legally incompetent to manage the purchase of health insurance or healthcare. And, by implication, much of anything else.

Yes, there are some people who are legally incompetent. But—straw man again—Keller and Davis are not advocating social services for the incompetent. They are defending the ACA, which applies to all of us. So they must think the vast majority of us are incompetent.

If not blatant illogic, this is a breathtaking aristocratic paternalism. Noblesse oblige. The poor little peasants cannot possibly be trusted to take care of themselves. We, the bien-pensants who administer the state, must make these decisions for them.

Let me ask any of you who still agree, does this mean you? When you are faced with cancer, do you really want to place your trust in the government health panel, because they will make better decisions than you, with your doctor and family? Or is this just for the benighted lower classes, and you and I, of course, know how to find a good doctor and work the system? 
Choice is always between alternatives. Sure, some people make awful decisions. The question is, can the ACA bureaucracy and insurance companies really do better? Yet you would not trust them to buy your shirts? And once again does the entire gargantuan bureaucratic apparatus of the ACA follow, not from the proposition that there is some fundamental economic market failure, but because . . Americans are no good at shopping?

No. Health is not too important to be left to the market. Health is so important—and so varied, so personal, and so subjective— that it must be left to the market. If you do not trust the vast majority of people to make the most important decisions of their lives, and a government bureaucracy can make better decisions on their behalf, you are a devout patrician, not a devout capitalist.
Well, that was fun, wasn't it? You may or may not agree. You may think I go on too long. But you can't possibly write that I "ignore" Noah's arguments.

By the way, if we're going to get huffy about "ignoring" classic writings of Nobel Prize winners on health care, Noah really shouldn't ignore this classic by Milton Friedman

Noah also starts with a logical whopper:
Americans, in general, support government-provided universal health care. A Pew Research Center survey taken in January found that 60 percent say that it’s the responsibility of the federal government to make sure that all Americans have health coverage. 
This should be on the SAT reading comprehension test. "Does the evidence support the proposition?" No. "responsibility... to make sure that all Americans have health coverage" is not "support government-provided universal health care." I support the former, and  not the latter. There are lots of ways, including involving extensive deregulation combined with robust charity care, to deliver "health coverage" without "government-provided universal health care."

So this ends up, really, being another post about language and rhetoric. What is going on with Noah, and with Bloomberg, and their fellow travelers, that such gaping holes of basic logic pass muster? That you can write a personal attack without making it through a blog post, let alone doing 10 seconds of googling to find if your allegations have any basis at all? I'll leave it to you to fill out the names and analogies for the rhetorical strategy. I guess if they think so little of American's shopping competence, they think equally little of their critical reading capacity.

Update: Thanks to a correspondent who pointed it out, we can now add Brad DeLong to the list of people who can't even be bothered to link to an article they want to "smackdown," let alone show any sign of reading it. This is, however, not news.

38 comments:

  1. One of my main frustrations discussing political issues is that the people on opposite ends of the political spectrum tend to have different definitions for various words. The word "insurance" is a prime example, along with "fair" and "right". The problem with the word "insurance" is that while the conservative definition is fairly simple, a bet based on probabilities of a rare event, the left-wing definition is simply another synonym for redistribution.

    Any rational person realizes that having insurance pay for something like an OTC pain reliever is stupid - why incur all of those administrative costs for something that I should simply pay for myself.

    So, while you may be thinking "protection against an improbable event", the person you are trying to communicate with is thinking, "someone else (the evil rich) should pay for my health care."

    You are talking past each other.

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    1. Quite true. "Health insurance" is better compared to a service plan or extended warranty which pays for routine repeating expenses along with bets based on probabilities.

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    2. Catastrophic health occurrences, the kind that can wipe almost anyone out could probably be handled by strictly private markets with minimal regulation. But that is not what we have. Like Thomas W says what we have is prepaid health care, a kind of service agreement. The policies pay for even small and sometimes routine events. Some may argue that this may make sense in that it encourages people to seek medical service for the small events that may help them more likely avoid the catastrophic costly event. With the ACA mandate and requirements of what policies must cover , health insurance becomes similar to social security. The young pay more into the system than they take out while they are young and healthy, but they get their turn to take out more when they become older and less healthy. After all everyone who is lucky gets to be old and eventually too sick to keep living.

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    3. I would appreciate you not putting words in my mouth.

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  2. You write with remarkable clarity about health care, revealing years of careful thought and reflection. People could gain a lot by engaging with this analysis here in the comments section, instead of simply dismissing it.

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  3. http://www.fooledbyrandomness.com/SmithBSVendor.html

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  4. Thank you Mr. Cochrane for taking the time to debunk this quite often pretty ridiculous stuff that is being sold as educated opinions that have to be true (1. Bloomberg is perceived to only delivering "facts" 2. Smith has a PhD in economics, was even a professor, which is highly emphasised next to his Name. So everything he writes about economics has to be true (his selective way of citing other economists reinforces this impression for laypeople)).

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  5. If you haven't read it yet, John Murray's "Origins of American Health Insurance: A History of Industrial Sickness Funds" is essential. It shows how people banded together to solve problems in the health care market. Decentralized, privately-provided health care might not work in theory, but it works in practice.

    Here's a review by Werner Troesken: http://www.independent.org/publications/tir/article.asp?a=756.

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  6. Noah Smith should read Steven Landsburg's entry from March this year:

    http://www.thebigquestions.com/2017/03/15/information-please/

    In there, Landsburg touches on similar issues.

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  7. This is tough because, on a personal level, I like Noah. But when he writes he often trolls. Maybe because it sells. But I feel sorry for those who don't know better and buy this stuff. Much asymmetric information like with doctors and patients. Maybe we need a single-blogger system too.

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  8. The problem with health insurance markets is that health care is not a "normal good".

    And the more health care supplied, the more people use it, the more expensive it becomes. There's no supply-demand rebalancing. See the RAND health care study.

    Also, if you don't like the cost of health care, you can't not buy it. You'll die. Markets don't solve the Pirate Problem.

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    1. That is not correct. The increased costs are due to subsidizing health care. You will notice that any subsidy will shift demand and increase prices. Education, Food, Cars, Housing, the list goes on. Also it is not a 'rebalancing' it is an equilibrium. If you do not think there is an equilibrium you are dealing with a fundamentally different model of economics than what is taught in most schools.
      The idea that you will die without healthcare is an oversimplification. Were this the case I am curious how you think humans evolved to even tackle the problem to begin with.

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  9. "Will not one person fall through the cracks or be ill served by the highly regulated system? If I find one Canadian grandma denied a hip replacement or one elderly person who cannot get a doctor to take her as a Medicare patient, why do I not get to conclude that all regulation is hopeless and that only an absolutely free market can function? Both straw men are ludicrous, but somehow smart people make the first one, in print, and everyone nods wisely"

    Two points:

    a) Well, but it is remarkable that 1) the U.S. has the highest healthcare spending per capita in the world and that 2) US health outcomes are not that good compared to other OECD countries. Take the infant mortality rate for example. So, yes, agreed, anecdotes are anecdotes and not very useful but in many european countries many do not have to worry about keeping health care when switching/losing jobs. No system is perfect but it is hard to see how the US "shopping for health care" system is superior.

    b) But the main point is about taking the ACA as the point of reference. The ACA was as much as the Democrats could get through with an obstinate opposition from the Republicans. Had there been an agreement that the government needs to make sure everybody is covered by health insurance (as it happens in most other developed countries, with decent results), then we could have had an honest discussion about how to do that. In UK e.g. most conservatives would not dare to eliminate the NHIS. Instead, Obamacare was very similar to what conservatives advocated in the 1990s (and then inspired Romneycare) and still Dems were pilloried for it. So it is no surprise that the ACA bill wasn't the best bill one could have written (and let's also not forget all the lawsuits brought against the ACA which affected its operations too). So, yes, the ACA could be better but it was the intent of one party to make it as bas as possible. Not recognizing that is missing a big part of the problem.

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    1. As Mark Twain says, there are lies, damn lies and statistics. You need to look deeper into the numbers.

      On point one, infant mortality rates are high exactly because of the high quality of the US health care system. Specifically, problematic pregnancies that in other countries would not make it to term do so in the US, as a result of the better technology, but then the infant does not survive. These deaths are counted as infant mortality in the US but not in the other countries. As well, in the US more young people die due to drugs, car accidents and gang violence, which lowers life expectancy. If you look at life expectancy at 65, the US is comparable to other OECD countries. And if you look at survival rates from cancer or heart attacks the US ranks as high or better than the OECD average. So yes, it is fair to say that the system is expensive for what it is, but it is not fair to say that the quality of health care is substandard to other OECD countries. As well, you have to take into account that those other countries have hidden costs. For example, doctor salaries are lower because Medical school in many of those countries is free or nearly free. Yet the cost to taxpayers of educating those doctors or nurses is not included in the health care cost calculation (interestingly, nobody talks about this).

      On second point, as an economist I know only two ways to bring down the price: increase supply or decrease demand. Price controls simply lead to shortages. And this is what a lot of these other countries experience. The UK has addressed it in two ways. One is by attracting doctors from abroad. I know many Greek doctors who work in the UK thereby helping reduce the shortage of doctors there. In contrast, in the US, because of licensing requirements, it is very difficult for a foreign doctor to be allowed to practice. But if the US reduced licensing requirements that would help bring costs down; no national healthcare system is necessary. In general, the UK has been able to attract a lot of doctors from abroad. The second is by paying for patients who go abroad, including to the US, to get treatment (which brings our cost up). Now that there is a Brexit and hostility to immigration, and that the NHS started charging patients who get non-urgent care abroad, I have a feeling those lines will get longer or the system will have to get more expensive.

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    2. Compare the Swedes to Iowa or the FInns to New Hampshire. We have California and Alabama. Compare them to Columbia and Nigeria. We have the world's third largest and most diverse population. Compare our states to the developed countries based on their diversity. Some populations have proven more able to manage their health outcomes. Should we compare chain smoking, diabetic, barbecue chip loving Good old boys with nonagenarian Norwegian, salmon eating cross-country skiers?

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  10. "we can now add Brad DeLong to the list of people who can't even be bothered to link to an article they want to "smackdown," let alone show any sign of reading it."

    I think DeLong's name has been on that list for a long time.

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  11. "The ACA was as much as the Democrats could get through with an obstinate opposition from the Republicans."

    I the world that I live in, in the year 2009 when Obama care was passed through Congress, the Democrats had full control of the House, and a 60 vote majority in the Senate.

    The only power the Republicans had was to whine and complain. If the Democrats wanted single payer, they had control.

    The Democrats lost the 60th vote in the Senate when the people of the most liberal state in the country elected a Republican because they wanted to stop the Obamacare train.

    Blaming Republicans is just plain lame.

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    1. the democrat super majority was very short, between the franken thing, and byrd and kennedy's health problems.

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  12. Not the first time Noah misrepresents someone's view. He does this on purpose to make his columns more polarizing and entertaining to the crowd. He seems to think of this is a mere disagreement with John's view.

    For those who make a living from producing ideas, misrepresenting and oversimplifying one's views without apparent reason is a personal attack. It is not surprising then that Noah doesn't consider this offensive.

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  13. The first of five blogs about imaginary squabbles with the DeLong-Krugman support group found they DID provides links back then but then put words in my mouth. Maybe they quit linking after being caught making things up? https://www.cato.org/blog/imaginary-squabbles-part-1-krugman-delong-inflation

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    1. Krugman was, I think, shamed in to start providing links to his ad-hominem attacks. He originally habitually left them out. DeLong continues the practice. The bottoms of these have some documentation.
      http://johnhcochrane.blogspot.com/2012/01/stimulus-and-etiquette.html
      http://johnhcochrane.blogspot.com/2011/12/krugman-on-stimulus.html

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  14. What portion of health care dollars are spent in the ER?
    Numbers vary from 2-10% according to Politifact.

    http://www.politifact.com/truth-o-meter/statements/2013/oct/28/nick-gillespie/does-emergency-care-account-just-2-percent-all-hea/

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  15. I usually like reading Noah, even if I disagree. He can be pretty even handed. This last one is pretty disappointing and I lost a lot of respect for him.

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  17. You are no longer on faculty at the U of C but you are still teaching. Excellent review of these economic principles, more importantly, advancing critical thinking. As for being in no position to negotiate the bill, What is one's life worth? What would one pay for water in the Sahara if they were dangerously dehydrated? Personal note. I served in Southeast Asia and Vietnam. In some of those firefights, death was imminent. Anyone of those nineteen year old combatants would have given anything to be home. I heard it a number of times. What would Noah pay?

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  18. I think healthcare would be better thought of as a lifetime purchase instead of job to job or year to year. The reason being that it's most expensive when we can last afford it. I think you should pay when young to buy it down for when old.

    Society needs to decide if they want universal coverage or not. A free market solution likely won't provide universal coverage.


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  19. I reached out to Bloomberg and this was the reply from Noah Smith (I'm happy to validate by forwarding the email but I don't know where to):

    Hi, James! My editor pointed me to your criticism of my inference regarding John Cochran's health care argument. It seemed obvious to both me and the editor that Cochrane was referencing health care. However, I have reached out to Cochrane and asked him if he would like us to alter the wording of the sentence in question. So far he has not responded. Anyway, I appreciate your concern for the facts!

    Best,
    Noah Smith
    Bloomberg View

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    1. Noah has written what he has written. I have written what I have written. The facts are plain for the reader to decide, and whether the issue amounts to "wording" of "the" sentence (?), or to the rather larger violations of standard journalistic and ethical norms that I perceive. I do not see a back and forth as particularly productive.

      I hope that the substantive response -- yes, us "free market purists" have thought about all of these issues, thank you, we have articulated responses that you can debate, we don't just "ignore" them, if you only care to actually read what we have to say -- is more interesting than who said what when anyway.

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  20. While I understand health care spending is higher in the U.S., I couldn't help but laugh reading a Nat'l Geographic during a visit to the dentist. The article showed a graph of health care spending around the world and then had three other articles, one on a runner with an artificial limb, and two other articles about advances in healthcare. I think of robotic surgery, stents and IUD's and wonder where these technologies were invented?

    Also, in my state, MA, doctors are networked with insurances and have to accept the fee structures proposed by the insurance firm for the most part so the line about "the fellow on the way to the ER has no time to negotiate" seems off base unless he has no insurance, because his insurance company has already negotiated the fee reimbursement with the network of doctors that are most probably near him. And those fees are usually a function of the Medicare allowable. If negotiation is key, I would rather negotiate the fees I pay to Fidelity for my 401(k)but that is a different kind of market power.

    I used to read Noah regularly but it always seemed he was promoting an agenda. Promoting an agenda is not necessarily bad but hurts those of us non-economists who are looking for a more objective analysis. My remedy is to read a lot.

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  21. God on you, Dr Cochran. This is typical of Noah Smith. He's among those giving economists a bad name by explicitly playing the partisan and popecon bit. He publicly and subjectively attacks those he doesn't agree with (you, Milton Friedman) and exalts those he's fond of (see recent piece on Keynes) to an extent that is embarrsing to the field of economists. In my eyes, he has turned into a less-respected and less-credentialed version of Krugman... the economist turned oped columnist.

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  22. To address Prof. Cochrane's final puzzlement: the same bad arguments against market-based healthcare have been trotted out again and again, for the past four decades to my certain knowledge, because what the writers actually want is not healthcare for all, including the poor, but the same healthcare for everyone. They find it morally offensive that some people get more or better healthcare than others just because they are better off financially. That's the underlying case for government-provided (not just financed) healthcare: it promises to provide the same healthcare for all (notoriously it doesn't in practice, but that's another story). Once you have the conclusion that healthcare should be government-provided, all that's left is to get people to vote for it, and any means you choose are acceptable, because, as everyone knows, the end justifies any means, especially when the end is justice (in healthcare). So plausible-seeming arguments that are ready to hand get recycled endlessly.

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    1. Good point. The post was getting long so I didn't reiterate the main question -- OK, so the government is going to provide health care for the poor, indigent, unfortunate, etc. Why does it follow they have to take over health care for you and me? Why must we be dragooned into the system? Just tax me to pay for it and leave me alone!

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    2. Because, dear John, though I almost always agree with you, I don't want to have to decide how much to pay to cure my old dad's cancer. Neither would my dad like to take such a decision for himself. We prefer to pay taxes in advance and have to decide only about which hospital and doctor to choose. I write from Italy where this generally happens, the poor is cured as much well as the rich, and the health system seems to be much less expensive than US health system. Indeed, I prefer to avoid not only those major decisions, but even minor ones, for instance whether to pay for my blood pressure pills. I pay a bit for them, about fifteen euros every month, as I have a high income (lower income pay less or even nothing), but it is an easy decision. Of course a lot of improvements are possible here as well as in the US, but I hold my point. Taxes in Italy are very high, this is true, but mainly not because of our public health system. Sorry if I misunderstood your point. fabrizio.bercelli@unibo.it

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    4. Interesting. When I or a family member have a serious illness, and the doctor says "the national health insurance board has decided that x cancer drug is too expensive so we don't pay for it, " or "x medication works better but is too expensive so we don't pay for it," I very much want to be involved with that decision.

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    5. Why does it follow that they have to take over healthcare for you and me? Because government has essentially taken over nearly 50% of healthcare in most of America, or defaulted to no healthcare and ER stability and discharge policies.

      In the mid 2000s, Arizona started experiencing a shortage of OB/GYN docs, why? Because AHCCCS (Arizona's public poverty level healthcare insurance) had a policy of paying the lowest rates in the nation, and guess what- more than 50% of the births in Arizona were being paid for by AHCCCS- so OB/GYNs began leaving the practice in the state.

      Meanwhile, as you can see the largest success of Obamacare was in expanding AHCCCS in Arizona, but the large percentage of uninsured continues to put the healthcare system on life support- https://crh.arizona.edu/sites/default/files/022616_Healthcare_safety_net_report.pdf

      But to raise taxes to even begin to pay for these huge losses is impossible in America.

      So, you can have a constantly failing system that requires more and more money, or you can just give up and have it totally fail. In short, fix the medicaid problem with enough money and coverage or just accept that so many are still going to be uninsured, and forcing your costs up for insurance to cover all of those ER visits, and underpayment by Medicaid. LoL.

      In short, we can socialize medicine for the poor entirely through government, or through the insurance industry with far greater overhead.

      I would even suggest we just copy the Swiss system and be done with it, but so many people have gotten rich off the inefficiencies in our system that it would prove politically impossible.

      But raise taxes and just provide healthcare to the poor, and all of the kludges providing subsidies to healthcare could disappear, and actual help might be cheaper than the eternal cycle of ER visits....

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    6. John, it happens very rarely in Italy that the National Health System says "This very useful cancer drug is too expensive and we don't pay for it". Nothing of this kind never happened to anyone I know of, for any kind of serious illness. Whenever it happens, you can still buy that very expensive drug by your own money. This is up to you. Let me repeat, very rare cases: not perfect, but acceptable. Anyway, it will take a few years and even that drug will be available through the National Health System -- of course, if you are rich you will have to pay some percentage of its cost. In Italy many things work very badly in the public sector. But the public health system works rather well, and is not expensive -- as you certainly know better than I do.

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    7. Fabrizio, see below what the BBC reports for England. Similar studies show similar results for Canada. And the numbers are probably lower because those who can afford to do so, come to the US. Now, given that the population of England during that period was about 52 mil, the percentage is indeed very small, 0.03% over a five-year period. But the report certainly dispels the idea that a national healthcare system gives poorer people equal access to health care. The question is whether we can do better than that.

      "There were 15,396 more deaths than expected at the trusts in the period between 2011 and 2016. Blackpool Teaching Hospitals Foundation Trust had the highest number of excess deaths - 1,878 over the five years. The analysis reveals a strong link between high mortality rates in England and lower than average doctor numbers. High levels of hospital bed occupancy also appear to be an increasingly important factor in high mortality rates."

      Source: http://www.bbc.com/news/health-39204681

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