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Danger, Greg Mankiw! Danger!

By Owen Paine on Wednesday June 10, 2009 05:41 PM

My darling imp, Harvard Yard's own Greg Mankiw, recently weighed in on the pending pub-op plan. Here's Greg, lasering to the nub right up top:

"Most discussions of the issue leave out the answer to the key question: Would the public plan have access to taxpayer funds unavailable to private plans? If the answer is yes, then the public plan would not offer honest competition to private plans."
Wam-bam bingo -- eh?

Now I know that not a soul reading this gets swayed by such a caveat. We pwogs of the saber-toothed variety couldn't give a Dutch fuck if "taxpayer subsidies would tilt the playing field in favor of the public plan," because for us heroic crypto-socializers the pub-plan-op is at best "a disingenuous route toward a single-payer system."

I think Greg is wrong even on his own terms, and I think he knows it. The imp hasn't counted all his potential tilts. Some are costless and sufficient.

But let me back up first. Let's look at a GSE like Fanny and Freddie. Are those taxpayer funds at work? Well, not so anyone regular should care. Yes, Uncle's implicit guarantee reduces their borrowing costs; but hey, that doesn't come out of the hides of taxpayers like you and me, does it?

Maybe Greg intentionally leaves something out here -- I doubt he misses much of anything in these waters -- but he's clever, he has an escape hatch in his use of the fuzzy phrase "taxpayers' funds". And if one takes the bait -- and surely we're meant to (note the slip into the use of the word 'subsidy') -- then we assume Greg means some sort of overt taxpayer cost, which indeed raises hackles.

You could so twist these words around to make a pub-plan option "standing on its own financially" look like "a private nonprofit plan," but "in essence" it would hardly be so.

Any civic "foundation" has to pre-build an adequate endowment before launching itself. On the other hand, an uncle-backed outfit simply issues bonds that in the event won't require any out of pocket taxpayer subsidy.

Uncle's guys could quickly be up and running and over the initial hump to the point where they're servicing their fixed costs and starting to retire their sunk costs out of operating margins like any viable privateering corporation does.

No operating subsidy needed, especially if the new outfit is just an add-on to medicare with its already existing facilities and staff.

Obviously if the criterion is Greg's "fundamental viability of the enterprise", then any startup hump is irrelevant, right?

Greg tries closing his argument with this: "But then what's the point [of a public plan option]? ...If advocates of a public plan want to start a nonprofit company offering health insurance on better terms than existing insurance companies, nothing is stopping them from doing so right now."

See, Greg wants us to conclude the reason these non-profit options don't already exist is because there aren't any worthwhile savings there to capture. Indeed the non-profit, with its eunuch's driveless nonprofit constitution will prolly higher-cost themselves out of existence.

T'ain't so, and Greg knows it, or he wouldn't be blowin' his casuist's sax like this.

Yes, a pub-plan option could be a competitor to be feared, Greg -- but not because it might have availible to it some taxpayer subsidy. Yes, Greg, you're right: unlike sleeping under bridges, "There is free entry into the market for health insurance."

But no, it does not follow that if a public plan without a taxpayer subsidy "would succeed, so would a nonprofit insurance company."

The real reason there are no viable non-profits today is simpler: what if a nonprofit on the scale necessary to capture these known economies is, as a practical matter, unconstructible by civic action alone?

If so, then Greg's "bottom line... honest competition in the provision of health insurance" does not lead to his conclusion that "a public option cannot do much good," since if it could some private goo-goo outfit would already be doing it.

Nope, Greg, you can't exorcise the spectre with that facile florish. Stay tuned, and see what, if anything, can fell PPO.

-------------

PS: Greg gives his overanxious tilt away right at the end by adding this bit, quite gratuitously and without further support: a public option "can potentially do much harm."

Well yes it can -- to the private profiteering insurance ghouls; but not to the pocketbooks of us little schmucked-up tax- and premium-payers.

Comments (4)

hce:

"what if a nonprofit on the scale necessary to capture these known economies is, as a practical matter, unconstructible by civic action alone?"

What do you mean by "civic action" OP? Any venture (like solar or wind-power generation) that's perceived to be in the public interest, as opposed to the bankers', will have to be subsidized in the start up phase.

It seems there's a more obvious fallacy in Mankiw's position (as presented by you): the "savings" that supposedly a single payer plan would produce are not savings to the plan itself, but to the public, or customers.

op:

Notice hce

I specifically assert there would not be any subsidy only uncle's implicit co signature on any obligations of the pub plan
I contend this borrowing capacity
Alone combined with agressive expansion would pay for itself and still under cut the pricing of any comparable hmo cabal offering

Also notice
Mank is not talking about single payer here
I suspect he steers clear of its very obvious and large comparative transaction cost
Advantages any. Sp system will have over any multipayer system

No he is only claiming if we erect a pub payer
From scratch and float it out amidst all
the pri payers
Without an uncle
Boost the pub.
Payer is just a non prof payer like any other non prof payer u or I might start up
But of course it isn't

and the fact non prof plans have NOT Thrived
Is no prefiguration
of a non subsidized uncle option's
Prospects

Needless to add
I doubt the public would object to a medicare expansion
Into this area which only magnifies the cost advantages

The mind bogles at the power and efficiency of such a systemic option


This brings much of deep signifigance into
The arena
And is why the debate and play thru oughta be instructive to attentive civic beings

Btw the savings indeed could mostly pass thru
As lower premia and co pays
But also as u point out
The reduction of compliance costs by providers as
One payer comes to dominate the system

Think of the hmo's
As. Inefficient profit
Sucking
make work projects in the interim

We need the jobs

op:

Btw
The roll of "profiteering"
in raising social costs in the health sector
Will hardly be removed by a formal conversion of existing hmo's to
Non profs
Even with severe parson prim inspired

Executive compensation caps

hce:

I think I committed a non sequitur, by adding what I thought you or he meant. I really only wanted to know what this phrase meant:

"unconstructible by civic action alone"

Your second comment makes a significant point -- who else besides the gov has the leverage to jawbone drug companies out of their ridiculous profits?

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