Wednesday, November 17, 2010

Budget Balance: Healthcare

I've been looking at a fair number of blog posts like David Henderson's I Agree: Budget Cutting is Easy

Like Arnold and some of his commenters, I found it way easier than I thought it would be to cut the federal budget on the New York Times' interactive site. After I was done, the Times announced that I had solved the deficit. How did I do so? Entirely with budget cuts, with one exception. ...I did increase taxes by having the favorable tax treatment of employers' contributions to employees' health insurance phase out gradually.

Somewhat similar (fewer cuts, more tax increases) we get Megan McArdle's In Which I Overbalance the Budget

allowing the Bush tax cuts to expire, eliminating or modifying major tax subsidies like the employer health insurance deduction, and cutting all manner of subsidies. I could have gone farther, but I deliberately left most military spending alone ... In fact, I generated too much in savings; we now have large surpluses in 2018 and 2030.

I was mildly surprised at how easy they found it, but as long as politically unrealistic solutions are okay I wish I could have expressed my actual preferences. Right now the Federal budget structure is roughly:

  • Defense and security: ... some 20 percent of the budget, or $715 billion,... includes the cost of .. Iraq and Afghanistan...
  • Social Security: Another 20 percent of the budget, or $708 billion....
  • Medicare, Medicaid, and CHIP: ... 21 percent.., or $753 billion...Both Medicaid and CHIP require matching payments from the states....
  • Safety net programs: About 14 percent...
  • Interest on the national debt:... $209 billion, or about 6 percent...
That's 55% redistribution to old/young/sick/poor, 7% federal pensions, 6% interest, 20% defense, 3% educ, 3% highways etc., 2% research, 1% furriners, 4% other. Present projections have the budget busted mainly because of the redistributions' future growth, mainly old/sick. (That's a completely separate issue from this year's deficits, which come mainly from the recession.)

As Ezra Klein puts it in Ezra Klein - Four budget calculators, one story

they're all good, clean fun, and they all make the same basic point: It's the health-care system, stupid. In the Times' calculator, the single biggest thing you can do is add a "magic asterisk" to the health-care system. We don't know how exactly we're going to hold Medicare's spending growth to GDP+1%, but if... we get that growth rate, or something close to it, we can get the budget into balance. If we can't, well, we can't.

Nothing else matters (to the deficit) but healthcare? Well, nothing else matters nearly as much, and "healthcare reform" didn't deal with it. So how do we reform healthcare? Answer: well, you already know my answer. In today's news from England, we have A patient was recovering today after making medical history by having a world-first heart operation carried out by a robotic arm.

Patrick Flood, 63, yesterday thanked doctors at Leicester's Glenfield Hospital just minutes after the operation finished. He was due home today. Dr Andre Ng, a consultant cardiologist, used a robotic arm and sophisticated computer images of Mr Flood's heart to fix its irregular rhythm. ... Dr Ng controlled the robot arm in a room next to the theatre, using the 3D computer model as a guide.
This is telepresence robotics: it doesn't replace the doctor with a robot (not for a long time yet), but it does mean the doctor doesn't have to be there. Next room? Next county? Across the Atlantic? Anywhere. And that means that the traditional economic benefits of specialization and trade are available for medicine: the world's best surgeons for sub-sub-sub-specialization X.37.Z.13 can be based in countries A,B, and C, available 24/7 anywhere on earth, competing with the almost-as-good group in countries D,E,F... Since they don't have to handle anything but their own kind of operation, their training can be shorter, and updated more frequently, than that of a surgeon who has to handle a wide variety of problems for patients from a particular region. (You do need a local patient's representative trained as a general-purpose physician's assistant, probably.) Of course telepresence in diagnosis is just as important; here's a two-week-old press release - AT&T announces new health division
AT&T already boasts a health portfolio that includes AT&T’s Telehealth Solutions, which uses video and audio conferencing to allow patients in rural and under-served areas to consult a specialist who may be hundreds of miles away. AT&T partnered with the University of California in April to provide Managed Network Services for the California Telehealth network...
and yesterday, Crain's New York Business was reporting on NYers discover potential of mobile health
The idea that electronic devices could bring health care to areas with few services is attracting big donors and setting off an applications race among technology and software companies.
Yeah, maybe. Well, actually, yeah. Right now they're talking about it as a way to communicate with the doctor you already have, but I expect and hope that if your doctor doesn't start outsourcing to specialists (who are always available, and FedEx will deliver your self-test tomorrow) then you'll find yourself using an Android/iPhone app that gets you directly to better diagnostic services.

Cheaper and better healthcare. Maybe. If we don't stop this from happening via the wrong kind of healthcare reform, then we'll get there eventually. And if we had the right kind of healthcare reform, like what I've talked about before, we'd get there sooner.

Or then again, maybe not

update: Well, there's another issue which I should have mentioned again as looming large in my always-mistaken thoughts: growth. David Leonhardt notes One Way to Trim Deficit - Cultivate Growth -

The Times’s online deficit puzzle... asks you to find almost $1.4 trillion in annual spending cuts and tax increases by the year 2030. If growth were a half point faster than expected, the needed savings would instead drop to less than $700 billion.

And how to promote growth? Well, tax reform is the approach suggested by today's Economist in Inequality and executive pay: All hail the progressive consumption tax!

Mr Frank's proposal is well worth considering on pro-growth and counter-cyclical grounds. As Mr Frank writes: "If a progressive consumption tax were phased in gradually, its main effect would be to shift spending from consumption to investment, causing productivity and incomes to rise faster. Should a recession occur, a temporary cut in consumption taxes would provide a much more powerful stimulus than the traditional temporary cut in income taxes."
Yup. I've said it before. The simplest approach, for my simple mind, would be to stretch the 401K notion to include a long list of kinds of accounts (not just your bank accounts but investment portfolio including real estate that you don't live in) as "pre-tax"; your income can flow into this list without paying taxes, and then it can grow, but you can't spend it without paying taxes. And we get rid of most kinds of deductions, apart from that deferral. (I say this as one who has a whole lot of deductions, each of which can be reasonably argued for, but whose net effect is that people like me are being tax-subsidized by people with a lot less money.)

I don't personally sneer at earmark reform; I view it as a significant part of a favor-trading system that makes it profitable for companies to lobby for targeted legislation , which I suspect of hurting growth far more than the dollar amounts of the earmarks would predict. But the main growth-promotion that a government can do is...well, all I can do is quote Adam Smith:

Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism but peace, easy taxes, and a tolerable administration of justice: all the rest being brought about by the natural course of things.
Peace is an arguable issue--how much should we (or can we) pay for the Pax Americana even if it's real? Tolerable administration of justice (mostly, rule of law) is something I think we've been moving away from, and I believe Obama has moved us further, and sometimes I'm even less optimistic than other times. But easy taxes, not needing to be nearly as low as Smith would have thought because we're so much wealthier now -- easy taxes we might be able to get.

Labels: , , , , ,