Health Care Fallacy #1

Tyler Cowen has three health care fallacies and the first one is something I’ve mentioned before (and tooke quite a bit of heat for),

Today’s report is this:

The financial outlook for Medicare and Social Security has significantly worsened, as the bad economy and mounting job losses have pushed both programs years closer to insolvency, according to a grim report issued Tuesday by the Obama administration.

Maybe you once argued that “Social Security is fine,” but dollars are fungible and the budget must be judged as a whole. The consumption tax is coming, I am sorry to say.

In other words, we can’t simply ignore Social Security in trying to get a handle on the long term fiscal imbalances facing the country. While in isolation Social Security might be “fine” and need only some minor adjustments, the entire budget is looking rather bleak. So, taking Social Security off the table might make the problem intractable.

I also like this part as well,

I’m seeing nascent signs of a new (but actually old) fallacy, namely that since health care costs can (will?) crush the budget, we don’t have to worry so much about other expenditures. The mental story runs something like this: “if we don’t cure health care cost inflation, it doesn’t matter; if we do cure health care cost inflation, we can afford it.” That’s exactly the kind of false mental framing that behavioral economics identifies as irrational in other settings.

FILED UNDER: Economics and Business, Government, Health, Social Security, US Politics, , , , ,
Steve Verdon
About Steve Verdon
Steve has a B.A. in Economics from the University of California, Los Angeles and attended graduate school at The George Washington University, leaving school shortly before staring work on his dissertation when his first child was born. He works in the energy industry and prior to that worked at the Bureau of Labor Statistics in the Division of Price Index and Number Research. He joined the staff at OTB in November 2004.

Comments

  1. steve says:

    Tyler is my favorite economics writer, so I will mostly agree with him. However, if you want to affect the budget, you have to go where the money is. That means entitlements, of which health care is the largest component. I would like to see Social Security in play. Which party will do so?

    Steve

  2. Mithras says:

    Maybe you once argued that “Social Security is fine,” but dollars are fungible and the budget must be judged as a whole.

    What is this supposed to mean? Yes, Social Security is fine. It will pay out its current level of benefits for over 35 more years, and then with some minor tweaking will pay them out over 35 more (which is far longer than we can really reasonably project, but our projections in the past have overstated the future cost, so we should be comfortable with that). Yes, dollars are fungible. Yes, health care spending is killing the budget. How these statements lead you to a conclusion that social security needs to be “fixed” is not apparent.

    Thank god we didn’t “fix” social security by privatizing it during the Bush administration, because a lot more seniors would be eating cat food and losing their homes.

    Social Security is off the table. What we’re going to do is move toward a single-payer health care system, which will fix that problem. We can easily afford it as is, and it will unleash all kinds of creative potential in our economy as people start businesses and change jobs without fear that they’ll be bankrupted if they lose their health insurance and get sick.

  3. An Interested Party says:

    What we’re going to do is move toward a single-payer health care system, which will fix that problem.

    I can’t wait to see the responses that line gets…

  4. We can easily afford it as is, and it will unleash all kinds of creative potential in our economy as people start businesses and change jobs without fear that they’ll be bankrupted if they lose their health insurance and get sick.

    Before you worry about releasing the creative potential of those who might start businesses in the future, what about those of us with businesses today whose fear of being bankrupted has nothing to do with losing health insurance but everything to do with killing our current creative potential by destroying credit markets, engaging in uncontrolled deficit spending that is practically begging for rampant inflation, a belligerent hostility to free markets and capitalism, and the inevitable tax increases which our Year 0 Caudillo hinted at yesterday?

  5. An Interested Party says:

    …and the inevitable tax increases which our Year 0 Caudillo hinted at yesterday?

    “Caudillo”? Oh my, perhaps the president should walk around dressed like this so that he can fit the illustrious description…

  6. odograph says:

    My #0 fallacy, the one that becomes before #1, is that “rationing benefits” is avoidable.

  7. Saturday links…

    From TARP to Command and Control. Kudlow
    The odd spiritualism of Arthur Conan Doyle
    Liberal fantasyland: Hoven at Am Thinker
    Newt on Pelosi. Harsh. CIA bites back.
    Related: Reality arrives to the Dems. They are supposed to be running the country. …

  8. G.A.Phillips says:

    Thank god we didn’t “fix” social security by privatizing it during the Bush administration, because a lot more seniors would be eating cat food and losing their homes.

    Ya I’m sure God wanted the liberals to wast your tax money instead of you being able to save it on your own so you might have some when you get older.

    lol!

  9. Rick DeMent says:

    While in isolation Social Security might be “fine” and need only some minor adjustments, the entire budget is looking rather bleak. So, taking Social Security off the table might make the problem intractable.

    Or the Defense budget, or Farm subsidies, or any number of things we currently do. If you want to say we nee to look at the budget in total … no argument, if you are saying that any of the other things like Defense should be untouched … no dice.

  10. Rick DeMent says:

    Also, if you think health care costs can be reduced without the following things:

    – end of life management
    – more competition among Doctors (read; lower compensation )
    – Changes in patent laws
    – universal coverage pool
    – no more rationing based on ability to pay

    Then you’re worse then a fool.

  11. Considering the actions of President Obama and those around him and supporting him since taking office I’m quite comfortable with the term caudillo. But I can understand if the parallels to banana republics make you uncomforbale.

  12. anjin-san says:

    Ya I’m sure God wanted the liberals to wast your tax money

    Yea, I am pretty sure God does not want old people to have health care…

  13. An Interested Party says:

    But I can understand if the parallels to banana republics make you uncomforbale.

    Oh, let me assure you that such a comparison doesn’t make me uncomfortable in the slightest, but, rather, merely amused…

  14. G.A.Phillips says:

    Yea, I am pretty sure God does not want old people to have health care…

    lol, I said wast your tax money, you know, the truth, He is not into stealing, or people that don’t work getting other peoples hard earned.

    lol, and I’m sure singing a bill as a first act as a nations leader to send more of said wasted tax dollars around the world to be used by one of the greatest perpetrators of crimes against humanity namely Planed Parenthood.

    charity for those who can’t take care of themselves, YES.

    stealing to pay for lies you told to get elected, NO.

  15. Steve Verdon says:

    Mithras,

    You just repeated the fallacious argument of why Social Security should be left alone. You didn’t even address Cowen’s argument. Try again.

    Rick,

    no more rationing based on ability to pay

    We don’t ration on ability to pay now. If you need care you get it irrespective of ability to pay.

  16. Grewgills says:

    We don’t ration on ability to pay for emergency care now. If you need emergency care you get emergency care irrespective of ability to pay.

    fixed.

  17. Grewgills says:

    Steve,
    If SS can be sustained in isolation why single it out for consideration rather than simply saying that we must look at the whole budget?
    When you simply state that we have to look at Medicare and SS it looks more like you have an axe to grind rather than simply saying that due to the size of the problem all options need to be on the table.