No Runny Eggs

The repository of one hard-boiled egg from the south suburbs of Milwaukee, Wisconsin (and the occassional guest-blogger). The ramblings within may or may not offend, shock and awe you, but they are what I (or my guest-bloggers) think.

Archive for September 27th, 2011

The opposite of PlaceboCare

by @ 19:30. Filed under Health Care Reform.

Those of you who have been paying attention to Rep. Paul Ryan (R-WI, and my Congressman) know the main parts of his ideas on health care. At the Hoover Institute today, he added a new twist – a full shift of the tax credits from the employer to the employees. You can read the speech or listen to it and a question-and-answer session…

I’ll give some highlights, along with the obligatory commentary:

Today, I will attempt to make the case for optimism. Specifically, I come bearing three pieces of good news.

The first piece of good news is this: The urgent need to repeal and replace the President’s health-care law, coupled with the urgent need to deal with the drivers of our debt, will present us with an unavoidable time for choosing, allowing us to confront health-care inflation head-on.

Ryan isn’t counting on the Supreme Court using the lack of severability in PlaceboCare to overturn the entirety of it by finding the individual insurance mandate unconstitutional, even though it is likely the Supreme Court will decide on that in the next 9 months (hmmm, what else in the health care field takes 9 months?). Instead, he’s not letting this crisis go to waste.

…And yet, across the federal landscape, choice and competition are undermined by poorly designed programs and tax policies.

In Medicare, the government reimburses all providers of care according to a one-size-fits-all formula, even if the quality of the care they provide is poor and the cost is high. This top-down delivery system exacerbates waste, because none of the primary stakeholders has a strong incentive to deliver the best-quality care for the lowest cost.

If you’re using Medicare, good luck finding a doctor because of this.

In Medicaid, a flawed federal-state matching formula is blowing out state budgets. There is no limit on the federal government’s matching contributions to state spending, so state governments spend most of their energy devising ways to maximize how much they can get from the federal government, rather than focusing on delivering high quality, cost-effective coverage for their most vulnerable citizens.

A prime example is former governor Jim “Craps” Doyle’s (WEAC/HoChunk-For Sale) increase in the hospital bed tax. It was sold as allowing Wisconsin to suck more money out of the federal teat.

Beyond these two programs, our current tax code provides additional fuel for runway health care inflation. Under current law, employer-sponsored health insurance plans are entirely exempt from taxation, regardless of how much an individual contributes to their policy.

This tilts the compensation scale toward benefits, which are tax-free, and away from higher wages, which are taxable. It also provides ways for high-income earners to artificially reduce their tax-able income by purchasing high-cost health coverage – which in turn can fuel the overuse of health services.

There’s countless examples of people taking and hangong onto jobs they don’t really want, or not taking jobs they’re suited for, just because of the presence of or lack of employer-sponsored health insurance. Elsewhere in the speech, Ryan pointed out the current scheme of insurance decouples the amount visibly paid to the proviers from the actual cost.

Why the POR Economy is not recovering

(H/T – Monty)

This is a few months old, but this piece from Rob Arnott relayed by John Mauldin explains why we’re headed into a double-dip recession (all emphasis in the original):

Consider a simple thought experiment. Let’s suppose the government wants to dazzle us with 5% growth next quarter (equivalent to 20% annualized growth!). If they borrow an additional 5% of GDP in new additional debt and spend it immediately, this magnificent GDP growth is achieved! We would all see it as phony growth, sabotaging our national balance sheet—right? Maybe not. We are already borrowing and spending 2% to 3% each quarter, equivalent to 10% to 12% of GDP, and yet few observers have decried this as artificial GDP growth because we’re not accustomed to looking at the underlying GDP before deficit spending!

From this perspective, real GDP seems unreal, at best. GDP that stems from new debt—mainly deficit spending—is phony: it is debt-financed consumption, not prosperity. Isn’t GDP, after excluding net new debt obligations, a more relevant measure? Deficit spending is supposed to trigger growth in the remainder of the economy, net of deficit-financed spending, which we can call our “Structural GDP.” If Structural GDP fails to grow as a consequence of our deficits, then deficit spending has failed in its sole and singular purpose.

By this measure, the economy is no better off than we were in 1998. Indeed, our soverign debt problem is even worse than it appears. From the conclusion:

Even our calculation of the national debt burden (debt/GDP) needs rethinking. Is the family that overextends correct in measuring their debt burden relative to their income plus any new debt that they have accumulated in the past year? Isn’t it more meaningful to compute debt relative to Structural GDP, net of new borrowing?! Our National Debt, poised to cross 100% of GDP this fall, is set to reach 112% of Structural GDP at that same time, even without considering off-balance-sheet debt. Will Rogers put it best: “When you find yourself in a hole, stop digging.”

[No Runny Eggs is proudly powered by WordPress.]