Iceland, the IMF and Austerity Protest

The story sounds familiar: neoliberal economic policies lead to a period of rapid economic growth followed by a debt crisis, imposition of IMF austerity policies and a surge of protests. But, this isn't Latin America in the 1990's, it's Iceland in 2008-2009. A Reykjavik radio station predicts that a quarter of Iceland's population could take part in a two-week, loan-repayment strike. The IMF's response to the financial crisis was a reported $10 billion dollar bailout plan conditional on huge cuts in public spending. The cuts are set to take place next year when "serious unrest is expected".

What's different about this story from Latin America in the 1990's is that Iceland's population appears to have widely participated in the bubble economy ("In just five years, the average Icelandic family saw its wealth increase by 45 per cent"). In Latin America, the growth spurt of the 1990's was accompanied by deteriorating social conditions.

The IMF might argue that it is not responsible for the policies of member countries and is doing the best that it can in a difficult situation. Hyman Minsky took a little broader view of our unstable, boom-bust-bailout financial system. The IMF is part of the system and the system needs to change.

Medicare and the Public Option

In today's Senate Finance Committee debate on the Health Care Public Option, Sen. Schumer (D-New York) asked Sen. Grassley (R-Iowa) if in addition to being opposed to the public option he was also opposed to Medicare. The consensus answer form a number of Republican's seemed to be that the Public Option would be like Medicare and that's what they didn't like about it (even though they were not opposed to Medicare) because the public plan might limit payments to physicians.

Medicare has had a difficult time controlling payments to physicians. In 2010, physicians face an across-the-board cut in Medicare payments of over 20%. This is about what would be necessary to keep growth in payments to physicians in line with growth in the US economy and is a result of Medicare's Sustainable Growth Rate formula (SGR). The SGR has been strongly resisted by the AMA and legislation since 2002 has consistently overridden the formula.

These circular arguments (we can't control costs even with a public option like Medicare even though costs are out of control) leave me a little despondent about our ability to control health care. But, just focusing on physicians, it begs the question of whether physicians in solo or small-group practice can effectively control costs. Do physicians need to move to larger, multi-specialty practices where there are economies of scale and control over prices for physician's services. And, if so, how do we get there?

Secession and the Massachusetts Model

Two news stories caught my attention today. First, Massachusetts is being watched carefully as a laboratory for health care reform. As a universal-coverage system, it is dealing with a lot of problems that will need innovative solutions. Second, the secessionist movement, which started in Texas, is spreading to other States on the East Coast and the Northwest. Evidently, there is growing sentiment that some States want to do things their way. Maybe there are Red States that simply don't want health care reform and don't want to have it forced down their throats by the federal government.

If we let States go their own way on health reform, here's what I predict will happen. States with universal coverage or single-payer systems will become magnets for (1) innovative small business that can't offer reasonable health benefits and (2) people looking for quality health care. Certainly, that's the case for Massachusetts. Laggard States will either become backwaters or be forced to provide some form of universal coverage that is as good as the single-payer States.

State-level experimentation might diffuse some of the secessionist turmoil and allow those who are angered by federal government initiatives to take their destiny in their own hands and live with the consequences. Hopefully, the federal government will do everything possible to help Massachusetts succeed.

More Problems with Health Savings Accounts

There are lots of problems with Health Savings Accounts. Here's one problem: people at lower income levels don't use HSAs. Here's another: it's very difficult to know how much to set aside each year since it's very difficult to find out what health care procedures actually cost. These are really deep problems with our health care system (and our society) that would have to be solved before relying on HSAs and catastrophic health insurance.

Earth System Complexities

In an earlier post I tried to simplify the IPCC findings on climate change. There still remains a lot of complexity and poorly understood feedback loops within the world system. Can that too be boiled down?

The graphic above gives some sense of the complexity of the known feedback loops within the earth system. Basically, the physical climate system would be in equilibrium without external forcings. So anthropogenic (human) forcings (in addition to other forcings such as incoming solar insolation, meteor strikes and volcanic eruptions) send the system in to disequilibrium.

The simplified graphic above, focusing just on disequilibrium, shows that there are still two somewhat unpleasant feedback loops the will return the Earth system to equilibrium. If climate change has a negative impact on human activity (such as flooding of the Mekong Delta as a result of rising sea levels), it will reduce land-use and CO2 forcings.

To avoid unpleasant Malthusian checks on human activity, we have the policy options (+/-) of reducing our land use patterns and reducing our CO2 emissions ("Feedback Loops in the Earth System" was the topic of today's "Global Warming Debate"). The simplified graphics is, I think, as simple as it can be put while still retaining the systemic aspects of the problem (Earth scientists would certainly disagree). Future posts will discuss some of the proposed policy solutions.

Is a Mandate a Tax?

This topic (from an earlier post) has also attracted the blogosphere (see Greg Mankiw's blog) with more substantive economic analysis having been provided in a 2001 paper by Larry Summers. The answer: it depends on how people value the mandated benefit. For those who do not value health care very highly, the mandate is a tax and is a cost to be avoided since it provides no benefits--until they get sick when they can become free riders.