Kevin Drum

Joe Lieberman is 21% Right (And 79% Wrong)

| Wed Dec. 9, 2009 1:56 PM EST

Joe Lieberman's latest excuse for not supporting a public option is that it would pay lower prices to hospitals, which would then make up the difference by charging higher prices to everyone else.1  This is called "cost shifting," and this morning I got a timely email from Austin Frakt telling me that there was some handy new high-quality research from Vivian Wu on exactly this question.  Is Lieberman right?  Is cost shifting real?

Wu’s main result is that on average prices paid to hospitals by private payers increases by 21 cents in response to each dollar reduction in public revenue. By way of comparison, this 21% rate of cost shift is about half of the lowest estimates produced by industry studies and is far below their common assumptions of 50% to 100%.

....The policy implications are clear. Wu doesn’t state them, but I will. Within the range of variation studied by Wu, with respect to hospital payments, overall health costs can be reduced by 79 cents per dollar of Medicare payment reduction, the other 21 cents being shifted to the private sector. However, the more competitive the hospital market the less the cost shift. For some hospitals in some markets Wu found cost shifting rates as low as 5%. Therefore, sound public policy would encourage greater competition among providers (wherever possible) in tandem with reductions in public payments. Doing both concurrently would reduce public health expenditures with minimal impact on private payments.

In other words, Lieberman is, at most, 21% right.  There's a little bit of cost shifting, but the vast majority of payment reduction actually goes toward reducing payments.  Hospitals might not like that, but why shouldn't the rest of us?

And this reminds me: I've got several posts from Austin bookmarked that I never quite got around to blogging about, and I suppose at this point I never will.  They tend to be pretty wonky, but if you like that kind of stuff you should check out his blog.  It's called The Incidental Economist.

1Actually, I don't know for sure if this is his latest excuse.  He changes them too fast for me to keep up.  But I'm pretty sure this was one of the more recent ones.

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It's Adobe's Fault

| Wed Dec. 9, 2009 1:32 PM EST

As you all know, the Transportation Security Administration mistakenly posted a copy of its screening manual a few days ago, providing access to lots of interesting little nuggets about how they operate.  The manual was supposed to have sensitive portions blacked out, but as in so many previous cases, the people who did it didn't realize that PDF documents come in several flavors:

Government workers preparing the release of a Transportation Security Administration manual that details airport screening procedures badly bungled their redaction of the .pdf file. Result: The full text of a document considered “sensitive security information” was inadvertently leaked.

....This is not the first time that redacted documents have leaked sensitive data.  AT&T lawyers defending their company in a spying suit made the same mistake three years ago in a redacted court filing. Confidential details discussed during a closed-door settlement hearing in a lawsuit against Facebook were revealed earlier this year when parts of the hearing transcript were insufficiently redacted. Federal prosecutors also made redaction errors in court documents they filed against two San Francisco reporters who covered the BALCO steroids story.

In 2003, the Justice Department botched the redaction of a controversial workplace diversity report, and in 2000 the New York Times inadvertently leaked the names of CIA collaborators when it published an improperly redacted CIA file on its website that documented American and British officials’ engineering of the 1953 Iranian coup.

I've long wondered when government agencies will finally figure out how PDF documents work, but so far the only answer is "not yet."  In the meantime, my great fear is that some overzealous bureaucrat is finally going to get tired of this and decide that the only answer is a government-wide ban on PDFs.  Or perhaps a government-wide ban on searchable PDFs.  That would be a huge pain in the ass for the rest of us.  But you just know it's coming if this kind of thing keeps happening.

Quote of the Day: Fredo Fesses Up

| Wed Dec. 9, 2009 12:55 PM EST

From Alberto Gonzales, explaining why, in hindsight, it was wrong for the Bush administration to purge U.S. Attorneys on flimsy grounds:

We should have abandoned the idea of removing the U. S. attorneys once the Democrats took the Senate. Because at that point we could really not count on Republicans to cut off investigations or help us at all with investigations. We didn't see that at the Department of Justice. Nor did the White House see that. Karl didn't see it. If we could do something over again, that would be it.

You know, most people would at least be smart enough not to admit something like this in public.  But not Gonzales.

Making Lemonade in Copenhagen

| Wed Dec. 9, 2009 2:19 AM EST

A couple of months ago — if not earlier — it became pretty clear that this week's Copenhagen conference wasn't going to produce the big climate treaty everyone had been hoping for.  Ever since, participants have been trying to figure out how to salvage things, and today Jonathan Pershing, the Obama administration's deputy special climate change envoy, took his crack at the spin machine.  David Corn reports:

Speaking to about 200 people from various environmental groups, Pershing made the case that a non-binding political agreement — in which the world's biggest emitters of greenhouse gases would pledge to take various actions to reduce their own emissions — would be more effective than a treaty establishing firm and legally enforceable commitments, according to several people who attended the session.

....Pershing, a well-known scientist who has worked on climate change for decades, maintained that a binding treaty — which would mandate emission reductions and contain penalties for noncompliance — could easily stall. It would have to be ratified by the U.S. Senate (which would require 67 votes) and winning Senate approval would be no easy feat for the Obama administration. (The Senate does not yet have the 60 votes need to block a filibuster of pending climate change legislation.) Other nations also would have to approve it. He pointed out that the 1997 Kyoto global warming accord, which the US Senate never approved, took five years to be ratified around the world. If Copenhagen did produce a binding treaty, Pershing said, it would be years before it could go into effect. In the meantime, emissions would continue to flow. A political deal, he contended, could kick in immediately

As spin goes, I suppose this isn't bad.  It's true, after all, that the prospect of getting 67 votes to approve a climate treaty in the Senate is piss poor.1  So perhaps this really is our only realistic alternative.  Still, it's the Obama administration's biggest climbdown yet, and one that suggests that Obama believes Waxman-Markey is the best we're going to be able to do in the near term.  Unfortunately, he's probably right.

1Though there's always the possibility of ratifying it as an executive agreement with only 60 votes, as NAFTA and other international agreements have been.

Healthcare in the Home Stretch

| Wed Dec. 9, 2009 12:55 AM EST

On an ABC news segment about healthcare tonight, Jonathan Karl said, "Democrats in the Senate are more optimistic on this than I have seen them in a long time."  Why?  Because they think they've struck a deal that can get 60 votes.  Most reports I've seen agree on the basics, including this one from Brian Beutler:

As has been widely reported, one of the trade-offs will be to extend a version of the Federal Employees Health Benefits Plan to consumers in the exchanges. Insurance companies will have the option of creating nationally-based non-profit insurance plans that would offered on the exchanges in every state. However, according to the aide, if insurance companies don't step up to the plate to offer such plans, that will trigger a national public option.

Beyond that, the group agreed — contingent upon CBO analysis — to a Medicare buy in.

That buy-in option would initially be made available to uninsured people aged 55-64 in 2011, three years before the exchanges open. For the period between 2011 and 2014, when the exchanges do open, the Medicare option will not be subsidized — people will have to pay in without federal premium assistance — and so will likely be quite expensive, the aide noted. However, after the exchanges launch, the Medicare option would be offered in the exchanges, where people could pay into it with their subsidies.

It appears as if liberals lost out on a Medicaid expansion that would have opened the program up to everybody under 150 percent of the poverty line. That ceiling will likely remain at 133 percent, as is called for in the current bill.

In addition to the new insurance options, the group has tentatively agreed to new, and strengthened, insurance regulations, which the aide could not divulge at this time.

So: an OPM-administered national plan, a weak triggered public option, a limited Medicare buy-in between 55-64, and some new insurance regs.  If this sticks, it's actually better than I expected.  I always figured we'd get a triggered public option and nothing more.

Of course, this still has a long way to go, and abortion is still a sticking point.  But for now, the prospects for healthcare reform are looking as good as they ever have.  Keep your fingers crossed.

Beware of Greeks Bearing Bonds

| Tue Dec. 8, 2009 5:50 PM EST

The collapse of Dubai World was just a shot across the economic bow.  But the collapse of Greece?  That would be a little more spectacular.

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Report From Copenhagen

| Tue Dec. 8, 2009 4:13 PM EST

Kate Sheppard reports from the Copenhagen climate conference:

In the early days of the Copenhagen summit....ClimateGate seems to be the main topic of interest for many of the 5,000 journalists here. I've been quizzed about it on several television programs, and yesterday I spotted British climate change denier Lord Christopher Monckton dishing on the affair to a gaggle of avid journalists. Scientists and leaders at the summit are being bombarded with questions about the "controversy."

Ugh.  The first few days of the conference are probably sort of boring, so I suppose it was almost inevitable that ClimateGate would get a lot of attention from bored reporters.  But maybe there's a bright side to this.  After all, right now Copenhagen is ground zero for real live climate experts who can explain in extensive detail why ClimateGate is a nothingburger on the science front.  So at least it gives journalists a good chance to figure out what it's really all about.  Plus it's probably good to let them get this out of their system early so that they're ready to concentrate on more serious stuff by the time the conference nears its climax.

There's more on Copenhagen from Kate and David Corn, our reporters on the spot, over at our Blue Marble blog.  Check it out.  In addition to our own blogging, the right-hand column has a real-time feed of Copenhagen reporting from other sources that should keep you up to date on everything that's going on.

Income Tax Greatest Hits

| Tue Dec. 8, 2009 2:46 PM EST

Via Jonah Goldberg, AEI's Mark Perry reaches deep into his bag of greatest hits and hauls out the chart on the right:

As the chart below shows (data here), the top 1 percent of taxpayers paid 40.42 percent of all income taxes collected in 2007 ($451 billion), the highest share in modern history for that group....One could even argue that the Bush tax cuts of 2001 and 2003 were actually huge “tax cuts for the poor and middle class” because they helped to increase the number of “non-payers” by more than 14 million Americans between 2000 and 2007. Secondly, the tax burden on “the rich” — the top 1 percent of taxpayers — reached a record high in 2007 of more than 40 percent, and was higher after the Bush tax cuts than before.

It's true that the share of income tax paid by the rich went up between 1980 and today.  But that's because the share of income earned by the rich went up during that period.  In fact, it more than doubled.  And since income taxes are a percentage of income, you'd pretty much expect that if your share of income more than doubled, then your share of income tax would also more than double.

But for the top 1% it didn't.  It just doubled.  In other words, it went up a little bit more slowly than their actual increase in income.  Why?  Because tax rates on the rich have decreased steadily under Republican presidents since 1980.

Griping about taxes is every American's birthright.  But if your share of the income pie increases by 135% over thirty years while everyone else stagnates, you're a pretty lucky ducky.  Surely the least you can do is not complain that your share of the tax bill went up by only 100%?

Housing vs. the Real World

| Tue Dec. 8, 2009 1:51 PM EST

A few days ago, riffing on a Tim Duy post, I wondered why, during the past decade, so much investment had flowed into the housing market.  Why didn't it flow into productive investments instead?  Why did investment in real goods and services suddenly become so much less attractive than housing?

To a certain extent, this is an ill-formed question.  What matters is the relative attractiveness of housing vs. productive investments, and you get the same effect regardless of whether the former goes up or the latter goes down.  Still, there is a difference, and as Duy points out, investment growth in software and equipment was objectively low during this period.  Mike Konczal takes a crack at explaining why:

One answer to Kevin’s question is because of the terrorist attacks on 9/11, and the financial scandals of Enron and Worldcom, bond markets were scared out of their minds that they might be lending to the next Worldcom. Noah Millman has an excellent description of that situation on the ground related to the beginning of the wave of structured finance. Worldcom is early 2002; people are spooked about the next landmine, and housing always seemed like a safe bet for both consumers, and because of some financial innovations and excellent ratings, for investors.

This sounds roughly plausible.  The dotcom bubble bursts, followed by recession and 9/11, followed by accounting scandals, and suddenly the real world looks like a pretty dangerous place to invest even if interest rates are low.  But there's still lots of money sloshing around, and it has to go somewhere.  Housing (and property in general) got the nod, this fed on itself, and eventually it spiraled out of control, producing a housing bubble.

Mike's secondary explanation is that, at the same time the real world got less attractive to investors, housing became more attractive to bankers because "financial innovation, deregulation, ratings agency’s behavior and changes in the repo markets" made mortgage loans more lucrative.  So they began marketing the hell out of mortgages.  This is also plausible.

But plausible is not the same thing is true.  We've had recessions before, we've had (regional) housing booms before, and we've had clever investment bankers before, but they've never produced the kind of national feeding frenzy we saw in the 00s.  (Not recently, anyway.)  So, while there's obviously something to both these arguments, I'd still like to see an effort by economists to try and quantify them.  Is there a way to do that?  Is there a way to somehow disentangle the importance of the decline in attractiveness of real-world investments vs. the rise in attractiveness of derivative-fueled housing investments?  It seems important to me.

GOP Fun and Games

| Tue Dec. 8, 2009 1:03 PM EST

Via ThinkProgress, Alan Grayson (D–FL) explains that the latest gag among House Republicans is to "forget" their ID cards so they can't vote electronically during roll calls:

They’d all walk to the front of the House and, laughingly and jokingly, put their arms around each other’s shoulder like it was some kind of clownish fun. And they did this over and over to make sure every vote took half an hour.

Steny Hoyer elucidates:

Well we’ve seen a couple of instances of that. Not so much forgetting their cards, but not using their cards and voting by the cards that are available at the desk. You have to write in and stand in a long line. And very frankly, the parliamentarian himself criticized that as delaying tactics which are not countenance by the rules. Obviously, every member has the right to vote. I thought they were unfortunate because it was such a transparent effort at solely delay as supposed to giving opportunity, fair opportunity to voting to every member.

It really is like presiding over a junior high school student council meeting, isn't it?  Except a little less mature.