Bruce Bartlett’s Worst Column

Bruce Bartlett once worked for Jack Kemp and for Ron Paul. He served in the Reagan and Bush (41) administrations. He even burnishes these credentials over a column at The New York Times economics blog. Yet his columns these days are invariably anti-Republican and increasingly leftwing.

In his latest post, he purports to make “a conservative case for the welfare state.” After accusing Republicans of wanting to abolish Social Security by privatizing it and wanting to abolish Medicare and Medicaid through vouchers and block grants he serves up this tidbit:

In a new paper for the New America Foundation, Professor Lindert…points out that there are huge efficiencies in providing pensions and health care publicly rather than privately. A main reason is that in a properly run welfare state, benefits are nearly universal, which eliminates vast amounts of administrative overhead necessary to decide who is entitled to benefits and who isn’t, as is the case in America, and eliminates the disincentives to work resulting from benefit phase-outs.

This is strange because the rest of the world has come to the opposite conclusion. More than 30 countries have fully or partially privatized their retirement pension systems, having decided that funded pensions — rather than unfunded Ponzi schemes — are good for the economy and good for economic growth. None of these countries, by the way, thinks it has “abolished” social security through privatization. To the contrary, they believe they have strengthened retirement security instead.

I can do anything better than you.

Yes I can. Yes I can.

 

Sweden, once thought of as the model for the modern welfare state, now has a full-fledged school voucher system, has privatized large segments of its health care system and is on the way toward privatization of almost all of its welfare state. Britain, which once boasted that its system of socialized medicine was “the envy of the world” has been privatizing health services for the past decade. Since 2008, National Health Service (NHS) patients have been able to choose any provider (NHS, private for-profit, private non-profit, etc.) they wish for elective care.

There are two problems with most left-wingers who write about health care: (a) they don’t know any economics and (b) they only communicate with each other. The first mistake produces foolish statements and the second ensures that the nonsense gets repeated over and over again. Bartlett (who has complained more than once that he was shunned on the right) is only too happy to join the crowd.

For example, Bartlett repeats the leftist canard that Canada’s health care system has lower administrative costs than the U.S. system. This has never been the conclusion of any serious economic study. It is instead propaganda produced by non-economists who wouldn’t know how to measure an administrative cost if their lives depended on it. For a review of the serious literature, see my book Priceless and the relevant chapter in Lives at Risk.

Bartlett also cites OECD statistics showing that the U.S. spends far more on health care than any other country and even claims that we could cut our payroll tax in half if we copied the British health care system. I’ll give him some slack for going to a reputable source, but anyone who writes about health care should know how unreliable those numbers are.

Every developed nation has so completely suppressed normal market forces in health care that no one ever sees a real price for anything. When the national income accounts folks try to measure what is happening in health care, therefore, they are always looking at phony prices. When you add up all the individual transactions (each with a phony price) you end up with one large phony number. Since other nations do more than we do to shift costs and disguise costs, their phony numbers tend to come in lower than our phony number.

A look at real resources, however, tells a more revealing story. We have fewer doctors and nurses per capita, fewer beds, fewer bed days, fewer doctor visits and fewer of most other inputs (but not technology) than the OECD average and our outcomes are as good or better. Again, see the review of the literature in Priceless and the relevant chapter in Lives at Risk.

Sorry to see Bartlett write like Paul Krugman on a subject about which neither is very informed. Both should know better.

Postscript: Linda Gorman, Devon Herrick, Robert Sade and I have produced a comprehensive review of the literature comparing U.S. health care with the health care systems of other countries. It’s a few years old, but still quite good.

Comments (31)

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  1. Buster says:

    The notion that governments can produce more efficient results by providing services collectively is a myth that’s hard to eradicate because it just makes so much intuitive sense. What people forget is the power of incentives and competition. The best intentions by workers in a government monopoly will soon give way to bloated, bureaucratic systems. These institutions are also very prone to political tinkering from all avenues. Take Social Security and Medicare. There is no Trust Fund except a notional accounting where contributions are spent by government and replaced with government IOUs that taxpayers have to make good on. There is also the temptation for Congress to dish out benefits more generous than would be the case in a profit driven system. Or decide there should be cross-subsidies from rich to poor. In a pension system, there is always the idea that investments should be determined by factors other than profit.

  2. Jordan says:

    Excellent post.

  3. Patrick says:

    The reason the Dem’s won’t allow privatization of Social Security is if everyone invested their own retirement funds the Fed Gov’t couldn’t borrow (steal) the funds to give to someone else. The Fed Gov’t would shut down in a month.

  4. Jeff says:

    Et tu, Brute?

  5. Ken says:

    Ditto Jeff’s comment.

  6. Greg says:

    There is no puzzle here. It’s all about Bruce. And if it isn’t all about Bruce, Bruce will do something to make sure that it is.

  7. Diana Furchtgott-Roth says:

    John,

    Bruce has learned that you get more press by attacking conservatives than by advocating efficient, market-oriented solutions. He needs to read your book. First he sets up a straw man–conservatives want to get rid of the welfare state–and then he attacks it. We don’t want to get rid of the welfare state, we want to make it more efficient and less costly to the taxpayer. Chile’s social security system is working far better than Britain’s, or ours.

    Diana

  8. Jerry Bowyer says:

    John, Bruce is now driven almost entirely by bitterness against the conservative movement which granted him a fine career, but never gave him the top accolades to which he felt he was entitled. The moment the right had less to offer him by remaining in it, then the left had to offer him by betraying it, he switched sides with glee.

    Jerry Bowyer

  9. Octobera says:

    So what is it going to take to have a correct system of measurement of health care cost and comparison for each country?

  10. Gabriel Odom says:

    It will take a miracle.

    The main problem here is the same problem that arises when people spend money they didn’t earn. I won’t complain about prices if I’m not paying any more than a $50 copay. If the consumers aren’t complaining about prices, then the producers can raise prices with impunity. The producers raise their prices, and the government then steps in to pay the bills. It’s a vicious cycle.

  11. Greg Scandlen says:

    This is just sad. No one values attacking sacred cows more than I do. We all need a rigorous reality check from time to time. But such an attack has got to be more than just reciting left-wing talking points. To suggest, as Bruce does, that the current Medicare and Social Security programs are just peachy and need no change is madness. But I guess that is the price of admission for getting a paycheck from the New York Times. This reminds me of J.D. Kleinke’s op-ed from just before the election in which he concluded the only reason Republicans opposed ObamaCare was because they want to control women’s bodies.

  12. Don McCanne says:

    “Bartlett repeats the leftist canard that Canada’s health care system has lower administrative costs than the U.S. system. This has never been the conclusion of any serious economic study.”

    And…

    “When the national income accounts folks try to measure what is happening in health care… they are always looking at phony prices.”

    As Moynihan and several others before him have said, you are entitled to your own opinions, but not your own facts. These statements are not found to be credible out in the broader policy community. Many outside observers find it dubious that NCPA is a fountainhead of enlightenment not found in the policy community at large.

  13. Charles Johnsen says:

    “broader policy community”? Probably leftist professors, to be redundant.

    We would get more wisdom and truth from a committee of the first one hundred names without PHD’s, in the Akron phone book.

    This is just more “consensus” crap. The only people who site consensus are those trying to stop inquiry and argument, ie, free speech. John gives examples but Don only offers insults in academic language.

    All prices set artificially (government oppression) are phony. Mises proved this nearly a hundred years ago. Every single thing the feds do for medical care raises costs and freezes innovation.

  14. Doctor Tom says:

    @ Gary Odom.
    Please don’t espouse rhetoric on a subject for which you know little or no knowledge. My fees and reimbursement are set by the insurance giants, Medicare and Medicaid. For nearly a decade my fees have been frozen at current reimbursement levels. That means in real dollars I have seen an annual decline in reimbursement.

    In addition Medicare has just reduced, by 13.6%, reimbursement on my my most frequently performed surgical procedure because their bean counters decided it was over-valued. Believe it or not, many of my patients are amazed at how little I am reimbursed for thew procedure.

    So please, explain to me once again how, as a producer, I am able to jack up my fees on an unsuspecting public and hornswoggle the Feds to pay my bloated fees.

  15. Uwe Reinhardt says:

    John:

    Your write:

    “For example, Bartlett repeats the leftist canard that Canada’s health care system has lower administrative costs than the U.S. system. This has never been the conclusion of any serious economic study. It is instead propaganda produced by non-economists who wouldn’t know how to measure an administrative cost if their lives depended on it.”

    Actually, Harvard economist David Cutler, whom both Harvard and probably the bulk of the economics profession consider a “serious economist,” did perform a comparative study of administrative costs in Canada and the US and did find ours to be substantially higher.

    http://www.ncbi.nlm.nih.gov/pmc/articles/PMC3024588/pdf/nihms262565.pdf

    Now, I know you have a habit of declaring that anyone with whom you disagree does not know any economics –you preamble many of your posts with that assertion — but I do set store by David’s work.

    In the trenches: I recall at the Duke University health system we had 300 people devoted full time to billing. The CEO of University Pensylvania Health System tells me that they, too, employ at least that many billing clerks.

    I can think of no other countries coming anywhere close to this kind of staffing just for billing.

  16. Kyle says:

    Dr. Tom,
    You start to lose the high ground with inflammatory remarks.

    He’s talking about moral hazard, which IS an issue. Prices ARE increasing at astounding rates (Dr. Reinhardt and Dr. Goodman have both covered this extensively). This is in part a function of supply driven costs and poor reimbursement rates. So bless you for keeping your costs low.. but a lack of hornswoggling doesn’t change the fact that producers includes more than providers.

    You’re right though. Reimbursement is a problem, but not for the reasons Gabriel is thinking.

  17. Kyle says:

    Hah, believe it or not I was writing mine before seeing that Uwe weighed in.

  18. John Goodman says:

    @ Uwe Reinhardt

    Thanks for directing me to the Cutler study. This study defines “administrative costs” very narrowly to mean how much time do doctors and their staffs spend on paperwork. Looking only at that, I am not surprised that Canada comes in lower than the US.

    More generally, countries with global budgets have a bureaucratic incentive not to care very much how the money is spent and therefore tend to ask fewer questions of providers.

    On the political left, however, the term “administrative costs” typically means spending on anything that isn’t medical care – as is revealed by the “medical loss ratio,” for example. Bad studies of this kind of cost tend to count advertising by insurance companies and the cost of collecting premiums in the private system but leave out the government’s spending on enrollment and the cost of tax collection in the public systems.

    When like costs are compared with like costs for this more general “administrative activity,” the government systems tend to be more costly.

  19. Ken Yale says:

    Bruce served with me in Bush 41. My recollection is that he was a Deputy AS at Treasury. Nice guy, but not knowledgeable about healthcare or health policy.

    How could he get so off in his theories? Not sure where he is coming from? Doesn’t make sense?

  20. Frank Timmins says:

    @ Uwe Reinhardt

    As a former administrator of health plans I could not help but notice your comment about the Duke University Health Care System, and I just can’t let it pass. I have to make the assumption that the Duke program is one that covers all the employees of the university (and is not some kind of community HMO or the ilk). That being the case I would like to formally apply for the job of administering the Duke University Health Care program. Without even looking at an RFP I will guarantee that I will cut the administrative costs by 75% (or I will do it for free). As an alum you will be heralded as a hero and I will make an obscene profit. In fact, if your friend at U. of Penn. would like in on this deal I will make it two for the price of one.

    But alas, I fear you have…um….exaggerated (or possibly misinterpreted) the number of employees involved in billing by – oh I don’t know – maybe 275 to 290 or so, which, if so, goes a long way in proving Goodman’s point in this piece.

    With regard to Bruce Bartlett, it seems he has contracted Charlie Crist syndrome. It is a form of delusional incoherence caused by personal rejection, and is quite common among narcissictic personalities.

  21. Dr. James Franco says:

    There are countless books, including one I am currently reading, regarding the abject failure of the European social model. Not very newsworthy.

  22. Richard Green says:

    You can rationalize all day, but the Republicans ARE trying to eliminate Medicare Thur Advantage and Ryan’s “premium support. Did you forget they pushed this bill thru at 2:00 in morning just as democrats pushed ObamaCare thru?

    All reports provide evidence that RX drug/Advantage program was just $8,000,000,000 wind fall for insurance and drug companies. They did try to privatize social security [do you NOT remember?].

    John, let’s not fall for democrat’s tactics like James Carville and twist the truth.

  23. Ken Yale says:

    It is sad to read such misunderstanding of the welfare state. Sad for the persons that policy makers purport to help, and sad for the American taxpayer. Allow me to explain.

    Bruce served with me in Bush 41, where he was Deputy AS at Treasury and my responsibilities included facilitating healthcare policy and legislation formulation in the White House. Prior to that, when Bruce was in the Reagan White House, I was legislative counsel in the US Senate where we deliberated, developed and passed health legislation. Those were exciting times, as we thought we had all the answers as we passed legislation and regulations meant to help people. Bruce continued in the policy arena, while my path took a different route – into the private sector to help translate the legislation and regulation developed by us well-meaning policy wonks.

    The experience was humbling. All the grand ideas that seemed to make sense from the ivory towers of the federal government were not so easily implemented in the real world. In fact, every time we developed new ideas to solve real world problems, we invariably created more problems than we solved. Even worse, the growing regulatory burden served to stifle true innovation. Currently my job is to find ways to solve real world health care problems while working through a maze of legislative and regulatory mandates that make it very difficult.

    The oversimplification of real problems by reducing them to theories easy to pontificate solutions is one of the maladies of the policy wonks in Washington, DC. Like a spendthrift saying “there is no spending problem,” while sending his family down a path of ruin. It is sad to think so much energy and taxpayer dollars are spent thinking up grand solutions that make great theory but fail in the real world. The fact that other countries are backing away from the welfare state, and looking for private sector efficiencies, should be a strong signal that these theories don’t work.

    Bruce is a very nice person, but my question is how knowledgeable is he about real world health care services? It is clear these theories don’t make sense in the real world, and I am not sure where he is coming from?

  24. EJ says:

    Bruce Bartlett also worked for NCPA, and was fired for writing a book critical of the Bush administration. No mention of that in this post, shocking.

  25. Kyle says:

    @EJ

    I think it’s humorous, you being on the NCPA forums telling them how it is. Did you read that in The New Republic?

  26. Richard Walker says:

    Bruce was employed by the NCPA as a tax analyst. He is a very good one when he writes about the issue objectively. The book Bruce wrote about Pres. Bush while employed by the NCPA was not the serious examination of reforming the U.S. tax system that the NCPA requested. While being paid by the NCPA to write that book, he instead wrote a largely ad hominem diatribe rather than a studied analysis of public policy. The work of the NCPA focuses on analysis of public policy, not on personalities or personal disagreements.

  27. Richard Walker says:

    I should add that what serious analysis was included in Bruce’s book attacking Pres. Bush had already been written by other NCPA analysts and published in other venues. Any review of NCPA publications will show that NCPA analysts have been, are now, and in the future will be free to engage in serious debate and criticism of public policy, including those adopted by Pres. Bush.

  28. Devon Herrick says:

    @ Dr. McCanne

    I don’t think anyone would ever accuse University of Pennsylvania health economist, Mark Pauly, as not being a serious unbiased economist. In a 1993 article that appeared in the journal Health Affairs, Pauly discussed some of the problems with comparing health care expenditures across countries. According to Prof. Pauly. (pps. 153-154) “To tell which countries are giving up more… to provide medical services to their citizens, one should measure and compare opportunity cost. Neither the OECD data nor any other calculations measure opportunity costs.” “If the United States is characterized (relatively to other countries) by greater monopoly power on the part of sellers of medical services and inputs, our spending may be higher, but our costs may be no difference (or may even be lower) than those in other countries.“

    Looking at opportunity costs for health care workers across countries, Pauly had this to say: (p. 158) “The message is striking. Far from having the highest medical labor costs relative to GDP, by this calculation the United States has one of the lowest percentages…”

    Later (p. 158) Pauly explains… “…a large part of the explanation for a lower GNP share [in Germany, Canada, Britain, etc] is that they pay health professionals less -– not just physicians, but nurses and technologists, too. Such redistribution does not benefit the country as a whole, or even the average citizen. Until we can get some reliable measures of true costs of medical services, in different countries, a moratorium on comparisons of spending levels might be the biggest contributions to a more reasoned health reform debate.

  29. Don McCanne says:

    To Devon Herrick

    Mark Pauly certainly is a well respected economist, but I would not call him unbiased, and in no way do I mean that in a pejorative sense. Rather he introduces a strong element of normative economics in which value judgements are introduced into the pure economic data. A discussion of opportunity costs is reliant on normative economics. We at PNHP also use normative economics to reach our conclusions in support of single payer reform.

    As an example, Mark Pauly’s work on moral hazard has been answered by John Nyman. The differences in their views can be explained by normative economics. We happen to prefer Nyman’s view since it emphasizes the value of health care access as opposed to emphasizing the value of reducing health care spending by erecting financial barriers to care.

    That said, my comment above is based on my view that introducing arguments that can be challenged on a factual basis moves beyond the discipline of normative economics. I stand firmly on the positions that economic studies have shown large differences in administrative costs between the U.S. and Canada, and that measurements of health care spending are not based on “phony prices” (though I regret the final sentence in my comment as being unnecessarily pejorative).

    Another example wherein we believe that John Goodman went beyond normative economics was in his treatise challenging single payer (in which he referred to me in his first footnote). His claims were rebutted in a paper by John Geyman (who, by coincidence, happens to be a houseguest of ours at the moment). http://www.pnhp.org/facts/myths_memes.pdf

  30. Frank Timmins says:

    @Don McCanne

    “…my comment above is based on my view that introducing arguments that can be challenged on a factual basis moves beyond the discipline of normative economics…”

    In that case Mr. McCanne, I suggest that you reconsider the value of your “normative economics”. Just because in your (or someone else’s) opinion an apple should taste like an orange, or even that the baser human instincts should not be part of being a human being, the facts do not change. Failing to recognize the facts of life is not only an illogical approach to economics, but a fool’s mission as well. And I do say this in a pejorative sense.

  31. FreeMktMonkey says:

    Also inflating the total reported expenditures of US healthcare are the many state mandated coverages that should be questioned as to whether they are properly classified as healthcare at all. As examples some states compel coverage of marriage counseling or massage therapy under health insurance, and there are billing codes to accommodate them. When mixed in with encouraged overuse via low deductibles or copays these “medical” costs can really add up.