A collapse of confidence
I've been diligently avoiding making posts lately about politics, economics or business. Perhaps the biggest reason for this is that, lately, I feel like I know almost zero about any of them. Anything predictable by my particular brand of common sense has gone straight out the window, and for the first time in at least the last decade, I feel
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The next big disaster looming on the horizon is commercial real-estate. Take you friend with the adjustable rate mortage. Of the 100,000 guys like him around the country a percentage of them are going to be unable to make their payments (and seriously, whoever thought an adjustable rate mortgaage was a good thing to have?). Generally, commercial property is more valuable that residential and we are going to see the last 18 months replayed starting in about 6 months except at half as many address but each address being much more valuable. Commercial mortgages will go into default (this is why they are stress testing banks and making sure they've got the money to cover their asses), the credit default swaps on the mortgages will kick in and the insurers of those mortgages will be on the hook for billions (this is why we are pumping $$$ into and through companies like AIG). Only THEN will we see the real bottom. If it's not the second great depression by 3 years from now, we'll know it worked.
Universal health care will actually help because employers won't have to worry about it anymore. there will, hopefully, be a powerful nationwide plan capable of negotiating lower costs.
As for the auto companies, Chrysler is already DONE, all that's left is the paperwork. It's FIAT now. THAT creats confidence it's not in limbo pending a lengthy trial, it's done Or at least there's a plan and everybody knows that this plan is THE plan.
Hopefully GM will go similarly.
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I'm going to have to go with economist sweetypotatoe on this one and attribute that belief to magic, I'm afraid.
I (and thus far every fellow business owner I've spoken to on the matter) am sort of sketchy on the details about how this will lower costs. First, just because the recipient isn't paying for it, doesn't mean that it costs less. "I get free health care" != "My health care is free." As business owners, we're already paying exorbitant health care costs. You're going to suggest that my costs will go down paying for a similar standard of care for everybody else in addition to my own employees? Huh. I'm pretty sure this is the same argument that got us Social Security, because it will be sooooooo much cheaper than expensive individual pension plans, and accessible to all. Can't say that's working out so well in the final analysis, and I know exactly what that's costing me, in addition to the 401(k)'s I'm funding.
Second, any collective bargaining attempts to lower group premiums will be constrained by two things: 1) Cost of doing business, and 2) supply and demand.
1) Malpractice insurance companies aren't getting rich raking in windfall premiums. Our tort system and the regulations and hoops that our doctors have to jump through -- ordering unnecessary tests, treating imaginary diseases, etc -- won't go away just because we have more people in the system. Those costs are real, and increasing. I 100% agree that we need a healthcare overhaul, which is not the same as universal healthcare. The system is not broken because people don't have access to it -- it's broken because people are able, nearly encouraged, to run roughshod over it at every turn, and doctors are incentivized to order up every test in the book to cover their own asses.
Stated another way, if my tech business was on the hook for multi-million dollar "pain and suffering" damages every time some client's PC crashed or caught a virus, let me assure you that all technical services and consulting would be 10x as expensive as they are right now...
2) We already have a shortage of doctors. Healthcare is not a commodity asset -- it takes expensive equipment, people with the skill and dedication to survive 12 years of rigorous education (college, med school, residency), and gobs of research (most of which never yields usable results). Over a long time (decades), a massive influx of new fully-vested patients may be absorbed by the system. When it first happens, however, you're going to be piling demand onto a system where supply is already constrained. You can't just order up a new doctor or specialist from the factory floor...
Anyhow, this has turned into a long rant. But show me the study that suggests Universal Health Care will fix our system. It's a great populist political gambit, but one that even the government's own reports warn could lead to financial and social disaster.
Simply, we just don't have the money. That doesn't make it free.
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I always find it interesting when hard-core marketeers defend our health care system. By any rational standard, it has been found wanting. We spend more of our GDP than any other industrialized nation, and yet our health statistics are mostly way below theirs. So we pay more to get less. Isn't the free market supposed to deliver the opposite result?
Only it can't, for the very reason you yourself state: health care is not a commodity. If it were, then the market would (eventually) give us the best product at the best price. But non-commodities are the one thing that markets tend to really suck at evaluating. So why should we trust the Free Market Fairy to handle it?
Put another way, the most expensive estimate I've heard for Universal Health Care is $2 trillion a year. Interestingly, the health care industry is a $2 trillion-per-year segment of the economy. So we can, indeed, afford it as a nation. We just choose not to, and for reasons that never quite make sense to me.
Oh, and I'm going to head off a few of the usual bugaboos here. Not all socialized health systems have longer wait times than the U.S. (Germany, for one, has much shorter). There are individual horror stories to be found in any system of health care, and the systems in other industrialized countries do not have a monopoly on them. Health care is rationed no matter what system you use; the question is what you choose to ration. Another way to put that is that any system involves a tradeoff between efficiency and equity, and how we balance those determines what gets rationed. Malpractice insurance costs are a problem, but so is the Frankensteinian billing structure. (And hey, I bet you any UHC system will include massive tort reform as a way to defend the system, so what's the problem?)
Sorry, but we can do better. What form that takes is up for grabs, but the basic evidence shows that we're underperforming and paying too much to do it. Maybe the Cleveland Clinic has the right model.
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You may believe Paul Krugman all you want. And I am in full agreement with him on some issues-- including a firm belief that UHC will be too costly without major cost cutting measures. Yet, I have not seen much discussion on how costs will be cut. Besides magic, of course.
I also must add that the "Free Market Fairy" hasn't paid a visit to the U.S. healthcare system in many, many years.
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