Whose Economist?

Like you, I was quite disappointed in this column by Krugman. In fact, with a background that includes 10 years of group health insurance experience, I've never liked a single thing Krugman has had to say on healthcare. He simply doesn't get how very broken this industry is.

As far back as 1978, I was telling my company that if we (as an industry) didn't do something to curb medical inflation (being well over average inflation then for a number of years), eventually our product would price itself out of existence. Krugman and others (including all of Congress) are talking about various ways of fixing the insurance product here as if this were some sort of solution to what ails us. No doubt this product has gotten lousy, but fix it all you want or get rid of it entirely, and the fact that the Medical Industrial Complex has not/cannot/will not control its pricing will still be there to break whatever we replace the current system with. And the only thing that Krugman has taught me along the way is that a person can be a brilliant liberal Nobel Prize-winning economist and still not have a clue as to what the hell is going on in healthcare economics.

If I could add a fine point on this ... what happens when you try to fix insurance without fixing the underlying problem.

The Baucus bill contains a provision about enpowering something called "comparative effectiveness reviews" (aka "MedPac on Steroids"), something the White House requested. This is the primary cost control method over the growth of Medicare costs. The Baucus bill would blow the top off its cost estimate without this. We don't even need to know this works other than the fact that it would change payments to doctors, obviously by lessening them.

A good idea, no? Especially as we are being told we simply cannot keep up with the increase in Medicare (a form of insurance) costs. So we're going to "fix" the insurance. Here's what happens.

The underlying costs (from the medical providers) go up REGARDLESS of what kind of insurance is being used to pay them. Only in this case, what will actually be paid to doctors will not go up as fast (or may even go down) for Medicare patients. How will doctors respond?

Simple. Over time, doctors will begin to flee Medicare. They will rightly prefer patients who pay them more, and over time, this will have the effect of rationing healthcare away from the elderly and towards those will private (employer-sponsored) plans. The much feared senior rationing will actually become real.

This is what happens when you try to fix just the insurance. You push in somewhere, and somewhere else pushes out. And this will happen no matter where you push on the insurance. Unless of course there is only one insurance policy to push on.

"...if you go to the Nobel Prize home page you will see the following headings – Nobel Prize in Physics, Nobel Prize in Chemistry, Nobel Prize in Medicine, Nobel Prize in Literature, Nobel Peace Prize, Prize in Economics.

Did you spot the missing attribution in the case of Economics? To understand why you have to go back to the original arrangements that were made in the will of Alfred Nobel. Here is what the organisation tells us:

In his last will and testament, Alfred Nobel specifically designated the institutions responsible for the prizes he wished to be established: The Royal Swedish Academy of Sciences for the Nobel Prize in Physics and Chemistry, Karolinska Institute for the Nobel Prize in Physiology or Medicine, the Swedish Academy for the Nobel Prize in Literature, and a Committee of five persons to be elected by the Norwegian Parliament (Storting) for the Nobel Peace Prize. In 1968, the Sveriges Riksbank established the Sveriges Riksbank Prize in Economics in Memory of Alfred Nobel. The Royal Swedish Academy of Sciences was given the task to select the Economics Prize Laureates starting in 1969.

So the economics award was not even part of the original deal but came from the Swedish central bank who must have been upset that my profession was considered less worthy. The fact is that the economics profession is not worthy of this sort of accolade given the state of its theorising and worth to humanity. Mainstream economists hinder human potential and human progress although they allow some individuals to become extremely wealthy at the expense of millions of others.

http://bilbo.economicoutlook.net/blog/?p=5079

Priceless: How The Federal Reserve Bought The Economics Profession

http://www.huffingtonpost.com/2009/09/07/priceless-how-the-federal_n_278805.html

Paul Krugman, in Sunday's New York Times magazine, did his own autopsy of economics, asking "How Did Economists Get It So Wrong?" Krugman concludes that "economics, as a field, got in trouble because economists were seduced by the vision of a perfect, frictionless market system."

He could have titled his article, "How Did I Get It So Wrong." He was not an exception.

The words "brilliant" and "economist" do not belong in the same sentence.

For further proof :-), here's the road Princeton Professor Paul Krugman's rubber would never touch:

http://exiledonline.com/reverse-repo-man-bernankes-plan-to-re-rob-the-last-1-trillion-from-ordinary-americans-and-hand-it-to-the-oligarchs/

Excellent video:

The Great American Bank Robbery

http://neweconomicperspectives.blogspot.com/2009/08/great-american-bank-robbery.html

On Krugman:

Keynes's Relevance and Krugman's Economics

http://neweconomicperspectives.blogspot.com/2009/08/keyness-relevance-and-krugmans.html