Tuesday, December 09, 2008

Listen to M_O_M

MaxedOutMama's five fixes for the economy:
1) Let energy prices crash. Don't meddle with any of it. The net stimulus over the next two years will probably be on the order of 350 billion plus. . .

2) Worry about lower income households. Increase WIC [the Federal supplemental nutrition program for Women, Infants, and Children] and food stamp allotments to redress some of the loss incurred through the high inflation of basic needs over the last few years.

3) Let the auto companies go bankrupt, and extend government loans to them as part of the bankruptcy workout. The unions and the dealers should have to make their claims in bankruptcy court. Those judges are often very good, and they will inevitably do better than a Congress which is bent on vote-garnering. If you leave the interest-balancing to Congress, they'll create a worse bust.

4) Consider addressing energy conservation by offering credits to utilities to do outreach energy conservation. Allow the utilities to sell subsidized conservation units to low income consumers with low monthly billing add-ons, and to use average savings from these measures as offsets against renewable energy mandates. . .

5) Don't try some massive medical policy change. Setting up group pools for small businesses and older individuals who have not yet qualified for Medicare would pay off the most.
Remember, M_O_M was right about the credit crisis. So, read the whole thing.


Geoffrey Britain said...

1. Fine
2. OK
3. What will be the unintended consequences? Someone needs to research the effect auto comp. bankruptcy will have on their retirees and the concomitant effect upon the overall economy.
4. Too complicated, addresses the issue merely on the fringes.
5. Doing nothing is not an option. Socialized medicine is not the answer. But the present system is unsustainable in the long run.

Solutions require the prerequisite of actually understanding the foundational aspects of the problem.

To my knowledge, no one is offering a simple answer to exactly why health care is so expensive and why it is increasing in cost exponentially.

MaxedOutMama said...

Geoffrey - good questions deserve good answers.

Here are the primary reasons:
1, 2)Primary care is tied up with all these claims. The idea of paying 100% for all care is a bad one in terms of economic efficiency, AND

Government insurance programs are growing exponentially. None of them except the ones for government workers pay enough on claims to cover costs. Thus costs are perpetually shifted to privately insured and uninsured individuals, which makes less of them able to afford insurance, which perpetuates a vicious cycle, shoving more and more people onto public programs.

3) Basic demographics. The older your population, the more you spend on health care.

4) The high reward to risk ratio of tort claims, which should be limited. It causes defensive medicine and expands costs.

5) Medical advances. We can do more, therefore we spend more. Over the long term, these higher costs sometimes pay off. Suppose you take a person genetically predisposed to death or severe disability by heart attack in their forties. (I have personally known four of these individuals.) Due to better diagnostics and drugs, if such a person is intercepted and treated in their 30s, their active life can be prolonged for 20 to 30 years at a minimum. It costs about four thousand a year, but you don't lose a productive person, incur higher costs for severe disease, and lose all of society's investment in that person. You do, however, shift costs forward in the cycle. Medical treatment is not all negative, even if you are paying higher costs.

Other examples of common diseases in which early treatment pays off hugely in net are MS, diabetes, certain forms of kidney and liver disease, etc. However, you must adequately fund the primary providers in order to get those benefits. Capitation arrangements don't. The key to obtaining the benefits are treatment by excellent GPs early in the cycle, with proper monitoring and controlling for risks. When a patient is cycled through a larger practice and really gets little continuous treatment from one highly qualified doctor, the results are a lot worse.

Carl said...


1) Because energy conservation is in the economic interest of both consumers and utilities, why do we need to extend credits for promoting conservation? The free market itself provides the necessary incentives.

2) I agree on healthcare, but shouldn't we be addressing the most critical market failure by severing health insurance from employment?

MaxedOutMama said...

Carl - by setting up the possibility of state-unimpaired affiliation insurance pools, one does just that. One would expect churches, athletic associations and the like to get into it, as well as universities, alumni associations, trade associations, professional associations etc.

As for energy, no, the free market itself does not. The reason is that a bunch of especially older and female-headed households are lodged in older housing with older appliances. They are capital-short and impaired. To get someone to come in and tell them what to do currently costs a lot and imposes a high risk of them being ripped off.

The utilities can offer free energy audits (many already do), free advice, and probably installation services. Utilities are already paying private customers to allow them to turn their power off or down in many areas because of the shortage of power. It would fit well with that initiative.

Anonymous said...

Yes. Health care should be severed from employment. Perhaps health care centers should be set up in or near schools to serve communities.

Carl said...


It's easier than that: when health insurance and health care has to compete for consumer dollars, they will come. No additional government incentive will be required.