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1) Bobby Jindal's 10 ideas for Republicans who want to lead on health-care reform. I'll have more to say on this tomorrow. The quick point is that a solid nine of them are in the Democratic plans.

2) Health economist Austin Frakt dismantles the idea that the difference between what private insurers and public insurers pay represents "cost-shifting."

3) People should really know more about Cargill.

4) I liked Andrew Sullivan's column on the virtues of "muddling" in Afghanistan. And I really liked the Marc Lynch post it references.

5) Ahmadinejad probably isn't Jewish.

We're not likely to see the Senate Finance Committee vote till later this week, if not next week. Right now, everyone is anxiously waiting for the CBO to render its verdict.

By Ezra Klein  |  October 5, 2009; 6:28 PM ET
Categories:  Tab Dump  
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Comments

Nine? That ain't my count. I'll wait for the post tomorrow.

Posted by: wisewon | October 5, 2009 8:19 PM | Report abuse

"Just because payers A and B pay different prices does not mean that if payer A paid more payer B would pay less"


Yes but the inverse is absolutely true if you speak to any hospital administrator (WHY HAVEN"T YOU DONE THAT EZRA??, AFRAID OF WHAT YOU'D HEAR??)

if payer A (medicare/medicaid) pays less then it forces payer B to pay more to subsidize payer A otherwise the control group (hospitals) go out of business which is absolutely happening. Hospital bankruptcies are way up and the medicare/medicaid cost shift is the reason why.

It starts with Payer A not with payer B because Payer A (medicare/medicaid) is a captive market. Unless hospitals want to be able to tell everyone once they reach age 65 to get lost (very unlikely at a time when the consumers healthcare costs will be at or near their highest) they don't have a choice but to accept it.

Posted by: visionbrkr | October 5, 2009 9:51 PM | Report abuse

Save Medicare with a "Money Making Public Option". Consumers get more choices, and the government makes money off the program. Forget “revenue neutral”. Why haven't more politicians pushed for a Deficit Fighting Public Option? It's the most effective way to get a Public Option passed, and it would make Republicans the ones who are fighting fiscal responsibility.

The idea is further developed at http://differentspeeds.blogspot.com/ I'd love to hear your input.

Posted by: differentspeeds | October 5, 2009 11:55 PM | Report abuse

I'd like to thank everyone who comments on Klein's blog for the way they do.

Somehow or another the comments here have almost always escaped from all the crap you find elsewhere. And that's true whether I agree with them or not.

I bring this up because I followed the link to Jindal's article in the Post and then started looking at the comments. And it was a horrible mess of insults, diatribes and stupidity on all sides.

I'm hoping that this tiny corner of the internet can keep up its quality.


Posted by: shelgreen | October 6, 2009 3:09 AM | Report abuse

Ezra,

This Austin dude is wrong. There is plenty of empirical evidence out there on cost shifting. For example, cf. David Dranove. Remember, >60% of hospitals are not-for-profit; there is a theoretical basis that is tied to ownership form.

Cost shifting does happen, thanks to Medicare and Medicaid.

And the only way a single payer system will control costs is if the median voter allows the government to lower quality. Assuming that the baby boomers are the median voters, I doubt a single payer system will control costs. A monopsony also introduces inefficiencies.

Posted by: RandomWalk1 | October 6, 2009 11:48 AM | Report abuse

Very poor job by Mr Frakt, not sure how anyone could call that a dismantling. It is a pretty perfect example of an economist getting so lost in theoretical wonkery that he completely ignores real world experience. Not to mention he relies on a very narrow definition of "cost shift", making his argument a bit of a straw man as well.

He makes the same mistake that Ezra did a while back (a mistake wisewon quickly called him out on), assuming that the existence of some hospitals breaking even on Medicare disproves that Medicare underpays, as if 1) breaking even is sufficient, and 2) cherry-picking the best ones somehow invalidates that the rest of them lose money.

Posted by: ab13 | October 6, 2009 12:58 PM | Report abuse

If price differentials are cost shifts (as some above seem to think), is it only so in health care?

Your row-mate paid hundreds more for the same flight as you. Did you shift cost to him? If you had paid more would he pay less? If so, why would the airline give up that additional revenue that they could extract from him?

Look, if substantial cost shifting exists in health care then the studies would consistently find it. They don't. A few have, but at a very low level, and some of those are from a different era so it is not clear they generalize to current market conditions. I'm sorry, that's what the studies on cost shifting show.

Studies on price differentials find--wait for it--price differentials. They're two different things. I've yet to meet anyone who equates the two who doesn't have a conflict of interest (enter the Milliman study and its sponsors).

Posted by: TheIncidentalEconomist | October 6, 2009 1:58 PM | Report abuse

incidentaleconomist,

you need to look at it from the hospital's perspective.


They know they need "X" to break even. If Medicare and Medicaid pays 10-15% less than "X" then it must be made up elsewhere for them to survive. The only somewhere else is private insurance. Other options could be lesser services, more efficency and both of those are very difficult to obtain. (its not like they're TRYING to be inefficent if they are).

The difference between your example of the airline flights is that the you're forgetting that Medicare and Medicare SETS PAYMENT RATES to providers and that is your constant. None of your examples do that. None of them have a constant like that which presides over the marketplace.


I challenge you (as Ezra won't) to speak to an unbiased but very interested party. Speak to a hospital administrator. They'll tell you the true story. I've met with some over the last year and they readily admit to the cost shift. Get one and make sure he or she's being honest and they'll tell you the same.

Posted by: visionbrkr | October 6, 2009 2:20 PM | Report abuse

You cannot call it a price differential, because what Medicare pays is not a "price" in the sense of the word you are describing. The gov't dictates what they will pay. Providers are not negotiating those prices the same way they are with insurers. And year after year as they review operating budgets and determine the amount of revenue they need to keep the doors open, any shortfall is passed on to the payers they are negotiating with, i.e. the private insurers.

The private insurers do not have the power of gov't nor the marketshare of Medicare that allows them to dictate what they will pay and basically force the providers to take it. They also do not have a great deal of freedom to refuse the price the providers request and look elsewhere because of the disruption it would cause with their insureds. Shutting off access to a given hospital/provider network is not something an insurer can do so easily and expect to retain all of their business and keep customers happy.

But the key issue here is not trying to define the precise economic definition of cost shift and determine if it fits this scenario. The reason this is important is twofold: 1) proposals have been on the table to create a public option that pays at or near Medicare rates. The more people whose care is reimbursed at those rates the more everyone will be charged to make up the difference. If you think the providers will absorb all of the difference or make it all up in "efficiency" you are mistaken. And 2) the rate of growth in spending between Medicare and private insurance is often held up as evidence that more gov't involvement in health care would be a good thing, but this ignores the fact the slower growth in Medicare spending is subsidized by the higher growth in private spending.

Posted by: ab13 | October 6, 2009 2:20 PM | Report abuse

And it is interesting that you would choose as your analogy a situation where all parties are participating in a market-based transaction, and comparing it to one with gov't price fixing. For your analogy to work the person who got the cheaper ticket would have done so because they were part of a certain class whom the gov't said would never have to pay more than $200 for an airline ticket.

Posted by: ab13 | October 6, 2009 2:27 PM | Report abuse

Government agencies buy a lot of airline tickets at "government prices." So, let's make that a government-purchased ticket if you like. Again, if the government price went up, would the airline give up revenue from the private-pay fellow sitting one seat over?

Are all price differentials the same as cost shifting? I'm making a distinction because there are studies that show a difference. What's wrong with that?

(At some point I'll stop coming back to read comments here. But I read them on my blog. As long as debate is respectful, come on over and join in.)

Posted by: TheIncidentalEconomist | October 6, 2009 2:59 PM | Report abuse

To make the situation analogous: if the government was purchasing half of all plane tickets at prices they dictated to airlines, prices which were below marginal cost, then yes, I do think increasing that price would lower the price for other passengers. It is a competitive marketplace, and the market would not allow them to extract additional profits by continuing to charge the higher price. The consumer was willing to pay it before, because they were charged that same inflated amount by all of the airlines. If the gov't purchased tickets now covered all or at least more of the marginal cost a competitive market ought to mean the price for everyone else should come down (Absent any collusion of course. The oligopolistic nature of the airline market may dampen the impact as well).

Are all price differentials the same as cost-shifting? No, not at all. I don't think anyone is arguing as such. We're arguing that this is a pretty clear case where a gov't dictated price that does not cover costs results in higher prices for others who have a limited amount of bargaining power.

And this is not simply an argument for increasing Medicare reimbursements. It is merely an argument against the fallacy of "Medicare controls costs, let's move more people to a plan that operates like Medicare".

And like I said earlier, you cannot call it a simple price differential when one of the parties is using the coercive power of gov't to set the price. This is not like the differential between booking a rental car a month in advance vs. walking in to Enterprise and needing a car today.

Posted by: ab13 | October 6, 2009 3:30 PM | Report abuse

So you have a theory. I do too (well it isn't mine so much as that of other economists I respect). What does your theory say about the degree of cost shift? Is it dollar-for-dollar or is it at a lower rate? Can you point to the (not obviously conflicted) studies that provide empirical support? It would be most convincing to me if they were published in peer reviewed journals. Better if they're in the modern era.

I did the work above for my side. Where's your side? The industry points to the Milliman report, which has obvious problems I noted. (My side is the hard side, by the way, since I am trying to prove a negative.)

You know, we may not really disagree if we dig as deep as I suggest with my questions above. There are studies that show a low level of cost shifting in some environments (though others that show no evidence of it). If that's what we're talking about there is no disagreement. I acknowledged all this explicitly and with my citations in my post.

Posted by: TheIncidentalEconomist | October 6, 2009 5:32 PM | Report abuse

TheIncidentalEconomist,


instead of just theorizing about it why don't you go ask a hospital administrator if you don't believe us? Especially one that is struggling. maybe one that just came out of bankruptcy like the 7 in NJ in the last year. You can do an interview and list it on your blog similar to what Ezra does with Senators etc on his. You can pontificate on what you believe to be fact just like the other side is or you can go get what IS fact. Seems like that may even help your viewership on your blog too. WIN/WIN.

Posted by: visionbrkr | October 7, 2009 7:50 AM | Report abuse

Here's my offer: http://theincidentaleconomist.com/health-care-cost-shifting-show-me-the-studies/

Posted by: TheIncidentalEconomist | October 7, 2009 10:54 AM | Report abuse

wait so you want to continue to advertise your blog on here and then have someone also do your work for you?

Sorry, no deal. (for me at least) I've already got a job thanks.

Talk to a hospital adminstrator. Talk to several. Do your own study. Then you'll get your facts.

Posted by: visionbrkr | October 7, 2009 11:21 AM | Report abuse

I read the literature. I wrote it up. I've heard from many in the hospital industry. They can't cite anything beyond the Milliman report I wrote about. If they can, I'll write about it. That's my offer.

Can't come up with anything? Too busy? Is that your best argument?

Posted by: TheIncidentalEconomist | October 7, 2009 12:43 PM | Report abuse

On second thought, I like your idea. So let's do it your way visionbrkr.

I'll talk to hospital folks and get back to you when I think I've got something worth reporting. When it appears, you'll see it on my blog.

Posted by: TheIncidentalEconomist | October 7, 2009 1:04 PM | Report abuse

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