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Medical Malpractice Reform: Truth in Advertising Needed (Part Two of Three)

by Michael Halasy

Medical Malpractice Reform: Truth in Advertising Needed (Part Two of Three)

So in the first article, we discussed the historical implications of tort reform by examining Texas. The take home message being that tort reform failed to curb health care spending, and/or control costs (outside of malpractice premiums which did fall). Proponents of tort reform claim that by enacting aggressive tort reform measures, so called defensive medicine practices could be reigned in. Estimates about the costs of defensive medicine vary, and I have seen estimates in the literature as low as 4%, and as high as 14% of total health care spending. As with most things, the truth is probably somewhere in the middle, with a realistic estimate of 8-9% likely being the real integer. Recently, several studies have attempted to assess two of the most important questions about this topic:

A: Does a reduction in defensive medicine practices occur with the implementation of tort reform measures?


B: If it does cause a reduction in defensive medicine practices, will this affect patient outcomes or mortality?

Three more recent studies are likely the most pertinent, and we will briefly review those. To start with, Currie and MacLeod (go ahead, I had the Highlander flashback too) (2006) reviewed national data on childbirths to examine whether or not a cap on non economic damages would change the types of procedures performed at childbirth. They found that nationally, in those states with tort reform, the rate of C-Sections increased, and the rate of preventable complications secondary to childbirth increased by 6%. They also found, that a change in the “deep pockets rule”, actually decreased them. The paper is HERE (gated article).

Then Sloan and Shadle in 2009 examined this same issue, using Medicare payments as an index. Their premise was, that if tort reform truly changed physician practices with regards to additional testing and/or defensive medicine, they would find a reduction in Medicare payment rates per beneficiary. They found that tort reform did not alter defensive medicine practices, with one exception. They did find that so called “indirect” reforms (mandatory periodic payments, Joint and Severability reform, and patient compensation funds) may reduce spending when applied to “any hospitalization”, but inexplicably, these indirect reforms did not affect any of the four diagnoses included in the study. Their paper is HERE.

There have been others, and the final one we will discuss is the NBER report done in 2009 by Darius Lakdawalla and Seth Seabury, Working Paper No. 15383. Found HERE (gated article). Essentially, Lakdawalla and Seabury found that while targeted reforms may be effective, there could be an associated, and this is key… a 0.2% associated increase in mortality for every 10% reduction in medical malpractice liability costs. Why? Because defensive medicine practices DO FIND things. Any physician who has been in practice for any length of time, and who is being honest with you, will admit that they have done a test presuming it would be negative, and “perhaps the patient doesn’t need it”, only to be surprised by the results. We can argue whether or not 0.2% is a significant number, but even we look at the sickest 5% of Americans who are responsible for 47% of healthcare spending, than this group could have an increase of 30,000 deaths annually with a reduction of 10% spending on medical malpractice. I am not going to pass moral judgment on this fact. I will leave that up to the reader. The reason I bring this up, is that this is an important, and poignant discussion, but we need to be honest about the data that is out there now. Let’s have a discussion, but let it be an honest, and fact based one.

I tend to think that the Sloan and Shadle findings are important in the fact that I don’t think that physician practices are going to “magically” change overnight. The Texas evidence from the last article, would suggest that testing expenditures may actually increase. Yet, in the face of overwhelming evidence, proponents continue to cling to a disproven ideology regarding direct malpractice cost containment, IE; Non economic caps.

[edited for ease of link usage only – klh 24 feb 2011]

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Last year many economists argued that the economy needed more quantitative easing which would drive down real interest rates (whether by driving down long maturity nominal rates or by driving up expected inflation). The counter argument is that quantitative easing is not effective if there is a liquidity trap.

Well we now have QE2 (since early November 2010) and real interest rates actually increased (very slightly). The 8 year real interest rate (TIPS rate on notes due January 15 2019 increased. I think that this is the real rate which was most likely to decline when the Fed bought 7 year (ordinary nominal) Treasury notes.

That didn’t do anything for the recovery and it is a response to an open market operation many times larger than the largest pre-Bernanke open market operation (I mean as a percent of high powered money outstanding — one has to be specific since Bernanke had earlier more than doubled Fed liabilities).

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Wisconsin, Have you Met L. Paul Bremer?

By Daniel Becker

Now that the story is getting out that Governor Walke et al’s bill is about more than just busting unions, a little bell went off in the back of my head. Yes, I read Shock Doctrine. Yes, I understand the true concept of fascism. I read What would Jefferson do. I read C & L, AB, Hullabaloo, Glen Greenwald, watch Rachel, Ed, Cspan, etc, etc, etc. And, there are some people pointing out the connections between some of all these perspectives. However, Wisconsin’s current event just seemed too familiar. Deja vue familiar. More familiar than all the reading and listening would allow. It is experiencingly familiar and I don’t mean Egypt.
I mean, we can all see (or at least a majority are now seeing) the thread of connection to all the seemingly disjointed liberal/progressive commentary about what has been happening in America since around 1981. We even are accepting that Clinton et al’s governing time was part of the thread. It’s economic. It’s societal structure, it’s civil rights, it’s power (always is since the constitutional convention).
But, where’s the beef. Show me the money. Where is the materialization most recently that it all came together as to the implementation of the play book that Governor Walker et al are using such that I know this is real…this is really and honestly currently America…American?
Folks…I give you Iraq: 10/10/2010

The political deadlock in Baghdad, which has prevented the formation of an Iraqi government more than six months after the parliamentary elections in March, has not prevented the administration of Nuri Kamal al-Maliki from opening the southern oilfields to the world’s giant corporations. Nor has it stopped the US Embassy and Commerce Department from reinvigorating the Bush-era program of selling the country’s public assets to corporate buyers. And because Iraqi unions have organized opposition to privatization since the start of the occupation, the Maliki administration is enforcing with a vengeance Saddam Hussein’s prohibition of public sector unions.
The United States may have withdrawn its combat brigades, but it is not leaving Iraq. And while Washington may have scaled back its dreams of nation-building, it has not given up on a key aspect of the economic agenda behind that project: encouraging corporate investment by sacrificing the rights of Iraqi workers.
June demonstrations over blackouts, supported by the union — the first national union led by a woman, Hashmeya Muhsin — were put down by police, who killed one protester and injured several others
Also in June, longshoremen protesting the prohibition of unions in ports south of Basra were surrounded by troops, and the union’s leaders were transferred hundreds of miles from their homes.
In January the government threw the president of Basra’s Iraqi Teachers Union in jail. According to Nasser al-Hussain, an executive board member, the government seeks to establish control over an organization it views as far too independent.
After the 2003 invasion, occupation czar Paul Bremer decided to keep on the books Saddam’s Law 150, which bans public sector unions. Each succeeding Iraqi administration continued the prohibition.
Wisconsin is not Egypt nor the rest of the protesting that is going on in the middle east other than that there is protesting. Not at all. Wisconsin is Iraq for one big, monstrous, sledge hammer to the head reason: Iraq’s oppression and thus resistance by the unions is all American. The union busting to the benefit of capital (big, huge money for the rest of you, as in Rockefeller’s Standard Oil time) in Iraq is purely American. We own it. Yes, we have propped up dictators such as in Egypt. What is singularly different in the protesting of Egypt/Mid East is freedom. They protested for freedom. Now we’ll see if they get unions. However, Wisconsin and Iraq are free. American style free in that Iraq is American made. They also have/had unions.
At the end of World War I, Iraqi workers wasted no time in forming oil, railway and dockworker unions in the fragmented country that Churchill had carved out of the desert, connecting the oil fields of three Ottoman provinces–Mosul, Baghdad, and Basra. Their hold on the terrain already tenuous, the British occupiers responded with force. Repeated strikes were quashed, often violently.
Under Qasim’s watch, unions along with civic groups swelled in rank and number. By 1959, 250,000 workers had joined unions in Iraq; peasants had formed 3,000 village associations for 200,000 peasants; the Iraqi Women’s League boasted 20,000 members and the Democratic Youth Federation 84,000 youngsters.
Qasim’s “progressive” autocracy was fleeting, however, and in February of 1963, the Baath party, in alliance with a sect of the nationalist armed forces, and with the help of the CIA, overthrew Qasim.
When Saddam Hussein seized control in 1979, he built upon the Baathist tradition of usurping the unions as an instrument of state power. As part of his brutal purge of all leaders and activists refusing to pledge total allegiance to the Baath party, he eradicated all non-Baathist unions. In 1987, the Baathist unions fully backed Saddam’s Orwellian decree: “From now on, the title ‘worker’ is abolished and all workers shall become official employees by the State…As everybody is now a government employee, there is no more need for trade unions.” Interestingly, Saddam did tolerate private sector unions, albeit with certain laws circumscribing their powers. The exception appears irrelevant, because, since the 1970’s through the fall of Saddam, no strikes are known to have occurred in Iraq, according to Political Risk Services, a well-respected corporate consultancy firm.
If you think Obama’s recent commentary is hopeful for unions, guess again:
When questioned by reporters about the union bans, an official at the US Embassy, the world’s largest, said mildly, “We’re looking into it. We hope that everybody resolves their differences in an amicable way.” The Obama White House has not spoken out, and the latest State Department report on human rights plays down the oppression of Iraqi unionists, calling their situation a “limited exercise of labour rights.”
Can you say Public Option? I knew you could.  However, start asking you gen X’ers and younger if they have heard of the “labor wars“.  You might be surprised, and not pleasantly.  Just like the term “rat race“.  Remember that one?  You need to.   

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Are Wisconsin Public Employees Over-Compensated?

by run 75441

Are Wisconsin Public Employees Over-Compensated?

Conclusion: Wisconsin public employees are not overpaid: The earnings equation estimates indicate that state and local government employees in Wisconsin are not overpaid. Rather, local and state public employees are undercompensated. When we make comparisons controlling for education, experience, hours of work, organizational size, gender, race, ethnicity, citizenship, and disability, both state and local public employees earn lower wages and receive less in compensation (including all benefits) than comparable private sector employees.

A standard earnings equation produces what some may consider a surprising result: full-time state and local employees are undercompensated by 8.2%. We observed, however, that public employees work fewer hours, particularly employees with bachelor’s, master’s, and professional degrees. An earnings equation controlling for work hours of full-time employees demonstrates that Wisconsin public employees earn 4.8% less than comparable private sector workers working comparable annual hours. EPI

WI public employees are underpaid by ~4.8% when compared to the private sector. Knight at Naked Capitaism kept insisting the bill would not remove collective bargaining. Technically, he is correct.

Who the bill impacts and how it impacts them:

“General municipal, county, and school employees (except police and fire), and school boards and local governmental units may only bargain over “total base wages.” Health insurance, pension, vacation, holidays, hours of work and any other conditions of employment (promotions, evaluations, safety, grievance/arbitration procedures and just cause standards for discipline) will be prohibited subjects of bargaining.” PROPOSED CHANGES TO MUNICIPAL EMPLOYEE BARGAINING RIGHTS MUNICIPAL EMPLOYMENT RELATIONS ACT UNDER CH. 111.70 [MERA]

The police and Fire Departments supported Walker so they are not subject to this bill.

Unions did offer up concessions:

“This afternoon, Marty Beil, executive director of the Wisconsin Public Workers Union, sent a message to the Governor’s office agreeing to the cuts to pension & welfare benefits sought by Walker in his bill. The governor’s response was “nothing doing.” He wants the whole kit and kaboodle – the end of the collective bargaining rights of the public unions.” Koch Brothers Behind Wisconsin Effort To Kill Public Unions, Forbes Magazine

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Going Galt in 2011 – I Guess Atlas Shrugs Was Right

by Mike Kimel

Going Galt in 2011 – I Guess Atlas Shrugs Was Right
crossposted at the Presimetrics blog

A couple years ago, there was a small spate of commentary of folks by conservatives and libertarians about how, if the Bush tax cuts weren’t renewed, we’d see a bunch of highly productive people going Galt. In other words, a whole bunch of people on whom society depends, seeing the parasites started sucking even more of their lifeblood, would simply withdraw from society… and the rest of us would suffer.

It turns out that those who gave us these warnings were partly right. It seems there are a lot of people – schoolteachers, firefighters, police officers and the like – threatening to go Galt in Wisconsin these days. Its just that the rest of the story isn’t playing quite the way the promoters of going Galt predicted. Nevertheless, I’m sure they must be absolutely ecstatic that some people have finally stood up to the government and said: “enough is enough.”

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Compensating the Losers from Trade

Uwe Reinhardt’s post the other day, “How Convincing is the Case for Free Trade?“, helped to kick-start a fair bit of discussion recently about the impact of international trade on the US economy. Mark Thoma and William Polley have shared their thoughts about the importance of compensating the losers from trade, while others (e.g. Tim Worstall) have questioned that need.

I’d like to add 3 points to this discusssion.

1. International trade is not substantially different from trade between two people within the same country. Both types of trade are voluntary agreements between the two parties to the transaction. And both types of trade may negatively impact other people in the economy who had nothing to do with the transaction. The main difference is simply that with international trade, the transaction happens to cross an international boundary.

2. Just because trade leads to an efficient outcome, that doesn’t mean it’s a good outcome. I think that a parable about a punch in the nose helps make that point. But even very bright economists often confuse “efficient” with “good”.

3. I see the problem of adequately compensating the losers from international trade as just a part of the larger question of how we treat people in our society who, through no fault of their own, have fallen on hard times. International trade is just one of the many enormous, inexorable forces that constantly reshape our economy. Technological change, demographic change, or the fluctuations of the macroeconomic business cycle may devastate millions of families each year just as surely as international trade. An important measure (to me) of the type of society we live in is how we treat those individuals who are on the losing end of those impersonal economic forces that, in the long run, often help to make the world a more prosperous place.

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Wisconsin, fiscal responsibility, and power (plants?)

Have you heard about 16.896?
“…with or without solicitation of bids, for any amount that the department determines to be in the best interest of the state.” Who knew behind the scenes it was also power plants? From rortybomb at the link above:

The fight in Wisconsin is over Governor Walker’s 144-page Budget Repair Bill. The parts everyone is focusing on have to do with the right to collectively bargain being stripped from public sector unions (except for the unions that supported Walker running for Governor). Focusing on this misses a large part of what the bill would do. Check out this language, from the same bill (my bold):

16.896 Sale or contractual operation of state−owned heating, cooling, and power plants. (1) Notwithstanding ss. 13.48 (14) (am) and 16.705 (1), the department may sell any state−owned heating, cooling, and power plant or may contract with a private entity for the operation of any such plant, with or without solicitation of bids, for any amount that the department determines to be in the best interest of the state. Notwithstanding ss. 196.49 and 196.80, no approval or certification of the public service commission is necessary for a public utility to purchase, or contract for the operation of, such a plant, and any such purchase is considered to be in the public interest and to comply with the criteria for certification of a project under s. 196.49 (3) (b).

(Update: Dan here…see also Linda Beale’s post on the same issue via Mark Thoma. Yves Smith adds her comments.)

The bill would allow for the selling of state-owned heating/cooling/power plants without bids. This excellent catch is from Ed at (who, speaking of Madison, took me to the Essen Haus on my 21st birthday, where the night began to go sideways). Ed correctly notes:

“If this isn’t the best summary of the goals of modern conservatism, I don’t know what is. It’s like a highlight reel of all of the tomahawk dunks of neo-Gilded Age corporatism: privatization, no-bid contracts, deregulation, and naked cronyism. Extra bonus points for the explicit effort to legally redefine the term “public interest” as “whatever the energy industry lobbyists we appoint to these unelected bureaucratic positions say it is.”

It’s important to think of this battle as a larger one over the role of the state. The attempt to break labor is part of the same continuous motion as saying that the crony, corporatist selling of state utilities to the Koch brothers and other energy interests is the new “public interest.”

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Federal Spending Growth

Crossposted at The Street Light.

David Wessel shows us the federal fiscal issue in one chart. The chart depicts an estimate of what the Obama administration’s budget proposal would mean for spending in each major category over the next five years. “The bottom line: Spending on interest, Medicare and Medicaid and Social Security go up – a lot. Spending on nearly everything else goes down.”

I prefer looking at it slightly differently. I think that when trying to understand the federal government’s fiscal situation, at least on the spending side, it is more informative to see how we got to where we are.

We now have an on-budget (i.e. excluding the Social Security program, which continued to run a surplus in 2010) deficit of about 9% of GDP. In the early 2000s, the budget deficit was about 4-5% of GDP. That’s deterioration in the on-budget deficit of about 4-5% of GDP between 2003 and 2010.

Now take a look at the following chart, which shows federal spending on actual goods and services broken into two pieces: spending related to defense, and spending related to everything else. Then I’ve added federal spending on the two Meds: Medicare and Medicaid. (Note that this latter category is actually a transfer payment, not spending by the government on goods and services, since it takes the form of the government reimbursing individuals for medical spending that THEY have done.)

Defense spending has gone up about 2 percentage points since the early 2000s. Med+Med spending has gone up by about 2 percentage points since the early 2000s. All other federal spending has meandered feebly between 2% and 3% of GDP. That slight lift in the green line in the last two years is the “massive” stimulus, or put another way, what “out of control government spending” apparently looks like.

If it weren’t for increased defense spending and the Meds over the past several years, the federal government’s budget balance would have been pretty close to unchanged. Despite the most severe economic downturn in 70 years.

I say again: what stimulus?

UPDATE: To clarify, Social Security is not included in any of the measures shown in the chart above. Social Security is classified as a “transfer payment”, not an actual purchase by the federal government of goods or services. The red and green lines above only show “government consumption expendistures and gross investment”, as it’s described in the National Income and Product Accounts; transfer payments are excluded. The blue line, on the other hand, does show a specific type of federal transfer payments: those related to health care. I think it’s more helpful to leave SS out of this sort of discussion since it’s basically an independent, self-funded program, and is neither the cause of our budget problems, nor an important part of any solution.

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Corporate Taxes from the AEI perspective–the AEI report gets an F

by Linda Beale

Corporate Taxes from the AEI perspective–the AEI report gets an F
crossposted with Ataxingmatter

[edited to correct typos and add link to CTJ and Leonhardt articles 2/19pm]

Kevin Hassett, an economic grunt at the American Enterprise Institute and frequent contributor to the Wall Street Journal op-ed pages, prepared a report for the institute on corporate taxation. Guess what–it claims that the US overtaxes its corporations and that is the reason that we are losing jobs.

There are all sorts of things wrong with this report.

1) it disregards the impact of globalization on corporate decisions to move enterprises, and the fungibility of operations if jurisidictions left don’t make the exit a highly taxing moment. It also disregards the lack of protection for US workers–yes, US workers are better paid than workers in undeveloped countries, and if multinational enterprises (MNEs) can merely substitute the one for the other, they will.

2) It first spends a lot of ink on the US statutory rate, complaining that it is higher than that of most other OECD countries. That is true, but really meaningless in itself. You can’t have a decent understanding of a country’s tax policies without looking at both tax rates and the base against which they are assessed. Since the corporate tax base in the US has more holes than Swiss cheese, looking at the rate tells you almost nothing about the corporate burden.

3) It notes that corporate taxes raise much less in revenue as a percent of GDP in the US than in other OECD countries. Somehow, the report intends this to be an indictment of the US corporate tax system as overtaxing corporations. I suppose the authors reach that by implying that corporations have fled the system and that’s why. But it is really an indication that the thesis in the title of the report–that the US gets an F for bad taxes that are making US corporations uncompetitive–is wrong. The US has such a loophole riddled corporate tax system that corporations are easily able to avoid paying their fair share of taxes. IN fact, other countries have more effective tax systems that get more corporate taxes out of their corporations as a percent of GDP, so the US must be a tax haven. It is rather surprising that we haven’t had an upsurge of grass-roots, tea party-style protests against all the big MNEs that manage to benefit mightily from the use of tax revenues (from roads to water to workers’ comp to subsidized health care) yet pay next to nothing in taxes in return.

For some examples of these MNEs with low taxes and much use of benefits, see David Leonhardt, The Paradox of Corporate Taxes in America, New York Times, Feb. 2, 2011 . Leonhard points out that Carnival Corporation “wouldn’t have much of a business without help from various branches of government” from the Coast Guard to Customs to road building and bridges and port maintenance, but the biggest benefit mayh be the price it pays, since it has only paid total (federal, state, local and foreign) taxes over the last five years equal to 1.1% of its $11.3 billion in profits.” Other major US corporations with substantial economic profits pay corporate taxes less than 10%–Yahoo (7%), Boeing (4.5%), Prudential Financial (7.6%). Id. (And wasn’t Prudential one of the banks that got to use the Treasury’s ultra vires notice permitting banks that acquired other banks to use their losses without the strict limitation provided in the tax code section 382?)

4) It claims that the US corporations’ effective tax rate is still way higher than for other countries. To do this, it uses two formulaic calculations for effective tax rates, neither of which is particularly trustworthy as to actual effective tax rates. It finds that its two hypothetical measures of effective tax rates come out at 29% and 23.6%. These are probably too high, but are considerably less than the statutory rate. it doesn’t, for example, look at the amount of actual taxes paid compared to the amount of taxable income reported. That figure would suggest a higher effective rate than actually experienced, since taxable income is much less than economic income. It doesn’t do what makes even more sense, look at actual current taxes paid as noted on financial statements of reporting companies compared to economic income as noted on financial statements of reporting companies. That number would be fairly accurate, and in fact comes out very low indeed. See, e.g., CTJ study, Revenue-Positive Reform of the Corporate Income tax, Jan 25, 2011 (noting that a Bush study in 2007 found only a 13.4% effective tax rate for 2000-2005, compared to a 16.1% rate for other OECD countries).

5) In comparing US corporations’ statutory taxes to those in other OECD coutnries, it takes into accout state and local corporate taxation (average) rates. But note that the US has primarily corporate income taxes, while OECD countries may have a host of other taxes, including in most cases a substantial value-added tax system (VAT). The report doesn’t bring that tax into the comparison. As a result, its comparison is again meaningless, because it isn’t really comparing the overall tax burden to determine whether the US corporations are in fact paying tax haven rates or being stymied in competition.

6) And of course, these corporate excusers provide only the slimmest of rationales for asserting that the US is aided by improving the competitiveness of MNEs in other countries–usually along the lines that helping them invest more abroad will also have a spillover effect in terms of more investment here. Actually if we help them succeed there by reducing taxes here, we are cutting off our noses to spite our face, since they will move operations there and do less here. We’d be much better off using that money to fund education and basic scientific research that can improve our quallity of life and give us new things to manufacture!

As usual with the AEI, the ideological agenda has resulted in a report that primarily serves a propaganda purpose. I’d say that it isn’t US corporate taxes that get an F, but rather this AEI report!

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let them try to buy health insurance in the individual market

Health care thought for a cold day:

If members of Congress feel so strongly about not doing anything about health care costs, perhaps we should stop providing them with health insurance. Let’s credit their pay for the amount that has been paid by the taxpayers, and let them try to buy health insurance in the individual market. (My bet is that they all would be denied).

Update: The link did not register… NYT opinion here

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