Relevant and even prescient commentary on news, politics and the economy.

Heads Up on Out of Network ER Doctors, etc. in 2019

Last December 2017, Envision Healthcare Corporation paid an approximate $30 million to settle allegations for subsidiary EmCare doctors getting bonus payments for admitting patients to hospitals when it was not necessary.

History:

A subsidiary of Envision, EmCare is a provider of physician services to emergency departments, inpatient services for hospitals, acute care surgery, trauma and general surgery, women’s and children’s services, radiology / teleradiology programs and anesthesiology services. If you have ever been hospitalized, Radiology is one service which always seems to have someone other than the hospital billing you. One study of billing practices of 194 hospitals in which EmCare handled billing and was out-of-network; the average out-of-network billing rate was 62% higher than the national average of 26%. When EmCare’s billing was compared to that of a competitor TeamHealth, the latter’s billing in other hospitals was less and there was a smaller increase in out-of-network service billing.

If you remember a while back, Rusty and I would discuss the ongoing consolidation of hospitals, clinics, and pharmacies. The reasoning behind the consolidation was to have enough market clout when negotiating with insurance and Medicare. Having a larger presence and being able to set pricing nationally and regionally is a big factor in the rising cost of healthcare.

Envision is the biggest player in staffing ERs and Anesthesiology departments with 6% of the $41 billion emergency department and hospital-based physician staffing and 7% of the $20 billion anesthesiologist staffing. Two-thirds of all Emergency Departments (ED) do some type of outsourcing even if it is short term.

Present:

United Healthcare insurance is pitted against Envision’s practice of over pricing for it’s 25,000 emergency doctors, anesthesiologists and other hospital-based clinicians charge to patients and pass through. The disagreement over pricing and how it is paid for by insurance as billed by 3rd party providers will spill over into patients being billed more frequently for higher prices not accepted by insurance.

UnitedHealthcare’s 27 million privately insured patients could face expensive and unexpected doctor bills as of 2019 if Envision doctors become out-of-network for United Healthcare. According to the research group NORC at the University of Chicago more than half of Americans have received an unexpected medical bill. In another study by economists from the Federal Trade Commission in 2017, 1 in 5 emergency-room admissions resulted in a surprise out-of-network bill.

While the ACA increased the numbers of people insured, approximately 20% of people have problems paying medical bills largely because healthcare is still rising faster than most other costs and income. One source of increased costs has been the billing from out-of-network doctors billing patients utilizing in-network facilities such as hospital Emergency Departments. NEJM recently published a Yale Study by Zack Cooper, Ph.D., and Fiona Scott Morton, Ph.D. (Out-of-Network Emergency-Physician Bills — An Unwelcome Surprise) reported on the increased occurrence of surprise-billing for out-of-network services.

Patients typically do not choose to use out-of-networks doctors or facilities. They will choose an in-network facility and expect an in-network doctor(s) to care for them. Healthcare insurance expects its buyers to use in-network services or pay a penalty for not doing so. When one arrives at an in-network Emergency Department, they expect to be cared for by an in-network doctor. I have yet to hear a doctor on duty offering up he or she is not employed by the hospital but instead by a third party. The patient is not aware of in-network or out-of-network issues until they get the bill. The market place is not working for the customer and the doctor still gets the business regardless of the price and there is no competition from other facilities or in negotiated pricing due to having insurance. The third party employer knows this issue as well as the hospital. The only fool in the room is the patient waiting to be cared for and be used. Insurance will pay a portion of the cost or negotiate with the hospital for a price. The third party company employing the doctor may yet charge the patient for the balance of the costs associated with the doctor and at a higher percentage than normal. The uncovered and unexpected higher cost is the rub.

The authors of the Yale study analyzed the claim’s data of a large commercial insurance company insuring tens of millions of people, focusing on ED visits for people under 65 years of age, occurring between January 2014 and September 2015, and at hospitals registered with the American Hospital Association. They chose hospitals with over 500 ED visits and identified the Hospital Referral Region (HRR). Utilizing the breakdown criteria yielded “more than 2.2 million ED visits Broken in 294 of the 306 HRRs, covering all 50 states, and capturing more than $7 billion in spending.” The map of the United States (above) is a pictorial representation of the data.

Summarizing their finding and estimating cost impact, Yale: “of the 99.35% of ED visits occurring at in-network facilities, 22% involved out-of-network physicians. The greater than 1 in five ratio (22%) masks a significant geographic variation in surprise-billing occurrence to patients among HRRs. 89% and 62% of surprise-billing rates occur in McAllen, Texas and St. Petersburg, Florida as compared to Boulder, Colorado and South Bend, Indiana with the surprise-billing rate there near zero.”

Envision questions the validity of the study and blames United Healthcare for not paying the billing and claiming insurance is the problem. Insurance coverage is a problem; but, it is not of the same magnitude when one starts to look at the increase in costs of $1 trillion from 1996 to 2013 of which 50% was due solely to price increases.

Additional Costs?:

And yes there are “potential” extra costs for patients who are treated by an out-of-network ER physician or any out-of-network service. In one hospital I was in, Radiology was out of network as well as one surgeon. Both negotiated a rate with United Healthcare. Then too, this was written into the ESI policy. I had no choice in doing in-network as I came through the ER each time and was too ill to decide and/or go to another hospital.

In a Kaiser/New York Times Survey: Among the insured with problem medical bills, a quarter (26%) said they received unexpected claim denials and about a third (32%) say they received care from an out-of-network provider that their insurance wouldn’t cover. The out-of-network charges were a surprise for a large majority: 69 percent were unaware that the provider was not in their plan’s network when they received the care.

The same NEJM/Yale study which had looked ay frequency of surprise Out-of-Network Emergency-Physician Bills also looked at the costs of the bill and what was left over for patients to pay. On average, in-network emergency-physician claims were paid at 297% of Medicare rates. For reference in the Yale study, the authors used other medical disciplines as a benchmark. Orthopedists are paid at 178.6% of Medicare rates for knee replacements and internists are paid at 158.5% of Medicare rates for routine office visits. The Yale study showed out of-network emergency physicians charged an average of 798% of Medicare rates resulting in a calculated, potential, and additional cost for patients. The difference between the out-of-network emergency physician charge and 297% of the Medicare rate for the same services in the patient’s location could be billed for an average balance of $622.55 (unless their insurer paid the difference). It is also important to note that the potential balance bills can be extremely high; the maximum potential balance bill faced by a patient included in our data set was $19,603.

The suggested solution from the study was for states to require hospitals to sell a bundled ED care package that includes both facility and professional fees. In practice, that would mean that the hospital would negotiate prices for physician services with insurers and then apply these negotiated rates for certain designated specialties. The hospital would then be the buyer of physician services and the seller of combined physician and facility services. If physicians considered the hospital’s payment rates too low, they could choose to work at another hospital.

The hospital, doctors, and the insurance companies would compete for the best package to service the patients utilizing them. In the end, this is a stopgap measure until healthcare costs can be brought under control in a better manner.

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Increase in Uninsured Children

I get the alerts from Georgetown University Center for Children and Families weekly. The news much of the time is a reflection of the number of attacks on families and children who have lesser means to provide for healthcare themselves and depend upon Medicaid, ACA, and CHIPS for care. Since the election of Trump, McConnell and Ryan have been strutting around like the cocks on the walk demonstrating their machismo as they hold women, children and families hostage. Tough guys both and it is easy to threaten women and children.

For the first time in a decade, the number of uninsured children rose in the US. It is not much of a surprise to me as Republicans made it miserable for many in states which did not expand Medicaid, held CHIPS hostage, and threatened those applied to become citizens with denial if they used the nation’s healthcare.

Some Stats:

The Georgetown University Center for Children and Families:

– An estimated 276,000 more children were uninsured in 2017 than in 2016
– Three-quarters of the children who lost coverage between 2016 and 2017 live in non-expansion Medicaid coverage states for parents and low-income adults. The uninsured rates for children increased at almost triple the rate in non-expansion states compared to Medicaid expansion states.
– Nine states experienced statistically significant increases in their rate of uninsured children (SD, UT, TX, GA, SC, FL, OH, TN, MA).
– Texas is #1 again. Texas has the largest share of children without health coverage with more than one in five uninsured children in the U.S. residing in the state.
– States with larger American Indian/ Alaska Native populations tend to have higher uninsured rates for children than the national average.

Some History:

The funding for CHIP expired September 2017 and Republicans and Trump were playing cat and mouse with Democrats to extend it while they looked for ways to repeal the ACA or weaken it. As Joan Aker the Executive Director of the Center for Children and Families stated;

“The majority of uninsured children are already eligible for Medicaid or CHIP but are not currently enrolled. The name of the game here is to make sure that families are aware that their child has a path to coverage and that these kids get enrolled and stay enrolled.”

2017 was tumultuous for families dependent on Medicaid, CHIPs, and the ACA. Added to this was Trump’s hostility towards immigrant families. 25% of the children living in the United States have a parent who is an immigrant. For “mixed status” families, the fear of interacting with the government deters them from enrolling their children in government sponsored health coverage.

Conclusion:

Again, Joan Akers of the Center for Children and Families: “The nation is going backwards on insuring kids and it is likely to get worse.”

If we can get the Democrats in the House off their butt and start to represent “their constituents” as determined by the founding fathers who designed the House to represent the population, we may be able to put in place the foundation for future healthcare gains. Instead, we have the House Representatives playing the secret ballot game for House Speaker with a promise of a Dean Wormer double-secret ballot come January.

Under Trump, Number Of Uninsured Kids Rose For First Time This Decade

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Aetna and CVS Merge

Nearly one year after agreeing to merge in a bid to reinvent healthcare for Americans, CVS Health and Aetna sealed the deal on Wednesday, bringing together one of the nation’s largest pharmacy chains and one of the largest health insurers.

CVS Health President and CEO Larry Merlo: “Today marks the start of a new day in health care and a transformative moment for our company and our industry. By delivering the combined capabilities of our two leading organizations, we will transform the consumer health experience and build healthier communities through a new innovative health care model that is local, easier to use, less expensive and puts consumers at the center of their care.”

Despite warnings from provider groups, patient advocates, economists, and antitrust experts of the combination harming competition and patients, the $69 billion merger scored approval from U.S. Justice Department antitrust enforcers and insurance regulators in 28 states. On Monday and surprisingly for me those regulators who always appear to be going after someone of some business, New York regulators became the last to sign off on the deal.

This is another example of the healthcare enterprise, big business, etc. getting ready for government sponsored single payer, Medicare-for-all, public option, etc. (whatever you wish to call it) having the power to negotiate pricing/costs of delivered healthcare if legislators actually decide to have such power. Otherwise, it becomes a simple cost shift to the government which will result in higher taxes and uncontrolled costs for healthcare which can be had for far less cost in our equivalent European neighbors countries. Other bloggers and many readers here and other places are used to calling out for these popular memes without definition.

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Passed on the Romaine Salad This Year

My wife was in charge of making the salad for Thanksgiving. For her easily done as she makes her own Italian dressing. I bought enough Romaine Hearts to feed 20 people. On Wednesday, we pitched them all as CDC said not to eat any Romaine as it was contaminated with E. Coli. We moved on to Spinach and Arugula.

It is not the first-time leafy vegetables have been removed from the grocery shelf and the dinner table. Indeed, if you glance at the attached chart, it has happened frequently over the years. Since 2006, there has been at least one outbreak of E. Coli yearly caused by leafy vegetables.

The Center for Investigative Reporting on its website Reveal was one of the first to break the story of why it has become hazardous to eat vegetables in the US. “5 people died from eating lettuce, but Trump’s FDA still won’t make farms test water for bacteria.”

Congress legislated actions to be taken in 2011 after several out breaks of E. Coli and the resulting illness. The testing of the water used to irrigate the fields growing the plants was to start in 2018. Six months before people were sickened by the contaminated Romaine, in response to pressure from the farm industry, and Trump’s mandate to eliminate regulations, the FDA delayed the water-testing rules for at least four years.

This particular outbreak originated in Yuma Arizona and is believed to be from irrigation water which is typically a prime source of food contamination and foodborne illnesses. When livestock feces flow into and contaminates a creek, the tainted water can seep into wells or is sprayed onto produce which is then harvested, processed, and sold at stores and restaurants. Salad leafy greens are particularly vulnerable and they are often eaten raw and can harbor bacteria when torn. In 2006, most California and Arizona growers of leafy greens signed agreements to voluntarily test irrigated water which minimizes the risk of contamination.

Farm groups contend the testing of water is too expensive. Some farmers contend the whole thing is an overblown attempt to exert government power on them. Postponing the water-testing rules would save growers $12 million per year. It would also cost consumers $108 million per year in medical expenses, according to an FDA analysis.

Go Figure . . .

Reveal: “5 people died from eating lettuce, but Trump’s FDA still won’t make farms test water for bacteria.” The Center for Investigative Reporting.

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Healthcare and….

Via Naked Capitalism and Lambert Strether:

And now abideth faith, hope, charity, these three; but the greatest of these is charity. –Corinthians 13:13

I posted this letter in Links, but I found I could expand on it. Spectrum Health Care’s letter to Hedda Martin speaks for itself, and for what our health care system has become under neoliberalism:


View image on Twitter

Dan Radzikowski@DanRadzikowski

(The provenance: I started with AOC, who hat-tipped @DanRiffle, who linked to the original poster, @DanRadzikowski, quoted above. From Radzikowski’s thread, Hedda Martin: “This is me”; Martin’s GoFundMe, which was successful.) In this post, I’ll focus on two things: the intriguing backstory of Spectrum Health, the institution that denied Martin care until she could raise $10,000; and the weaknesses of GoFundMe as a solution. Before I get to the main part of the post, however, I’ll point out that Hedda Martin’s example is not exception…

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The AMA is Calling for a Relaxing of CMC Opioid Prescription Restrictions

A little history:

In 1980, the Porter and Jick letter to the editor of the New England Journal of Medicine by the Boston Collaborative Drug Surveillance Program stated:

“the risk of addiction was low when opioids such as oxycodone were prescribed for chronic pain.”

It was a brief statement by the doctors conducting the study, taken out of context, and cited many times afterwards as justification for the use of oxycodone.

In a June 1, 2017 letter to the NEJM editor, the authors reported on the broad and undocumented assumptions made as a result of the 1980 Letter on the Risk of Opioid Addiction.. Using bibliometric analysis of the impact of this letter to the editor, the citations of the 1980 letter were reviewed to determine the citation’s portrayal of the letter’s conclusions.

Identified in the bar chart are the number (608) of citations of the 1980 letter over a period of time from 1981 to 2017.

“72.2% (439) of the citations, quoted the letter or used it as evidence addiction was rare in patients when treated with opioids such as oxycodone. 80.8% or 491 of the citations failed to note the patients described in the letter were hospitalized at the time they received the prescription.”

There was a sizable increase of citations after the introduction of OxyContin (extended release oxycodone) in 1995. As the analysis noted “affirmational citations of the letter have become less common in recent years in contrast to the 439 (72.2%) positive and supporting citations of the 1980 correspondence in earlier years. The frequency of citation of this 1980 letter stands out as being unusual when compared to other published and cited letters. Eleven other published, stand-alone, and more recent letters on different topics published by the NEJM were cited at a median statistic of 11 times each.

Citations of the 1980 standalone letter on “addiction being rare” from the use of opioids such as oxycodone failed to mention, the patients administered to were in a hospital setting as noted in the Porter and Jick letter. Overlooked, a mistake, intentional misquote by the people citing this letter?

In 2007 in the pharmaceutical industry, “the manufacturer of OxyContin and three senior executives of Purdue Pharma plead guilty to federal criminal charges that they misled regulators, doctors, and patients about the risk of addiction associated with OxyContin.”

This year, law makers questioned Miami-Luken and H.D. Smith wanting to know why millions of hydrocodone and oxycodone pills were sent (2006 to 2016) to five pharmacies in four tiny West Virginia towns having a total population of about 22,000. Ten million pills were shipped to two small pharmacies in Williamson, West Virginia. The number of deaths increased along with the company and wholesaler profits.

60% of all drug-poisoning deaths in 2013 involved prescription opioids and/or heroin. Among individuals aged 25 to 64 years, deaths from a drug overdose—the majority of which were opioid-related—exceeded motor vehicle collisions as the leading cause of accidental death in 2013. Four in five new heroin users started out misusing prescription painkillers.

The information is out there as to why the abuse of opioids and related drugs is increasing. It is being ignored or argued against as limiting a patients rights to have unhindered access to opioids by doctors and patients alike. Sound familiar, similar to the gun lobby?

Today

AMA Delegates Back Physician Freedom in Opioid Prescribing At best, 20% of all doctors are members and the percentage has been declining. From the meeting; “The CDC’s guidelines on the use of opioids for pain management are well-intentioned, but some insurers and pharmacists have used them to restrict providing and need to be discouraged from doing so, members of the American Medical Association (AMA) House of Delegates said Tuesday.”

And the CDC response as told by one doctor. “a member of a pain management task force being convened by the Department of Health and Human Services. “Draft comments will be coming out in a couple of weeks and will very specifically address the misinterpretation of the CDC guidelines,” he noted. “This is really timely because the comments from the AMA will be extremely important in weighing in [on the issue].”

Doctors do no want interference with decision- making when it comes to patients. At the same time, little has been done to rein in addiction due to prescription opioids which lead to other addictions because prescriptions are expensive or are limited in access. Here is Janet from stopnow blog and who writes about addicted babies due to mothers taking opioids:

More overdose deaths last year than the entire Viet Nam War. The FDA approves sufentanyl 10 times stronger than fentanyl. Yesterday the AMA President was quoted using the same verbiage as Big PhRMA- undertreatment of pain. And now a campaign to undo the CDC guidelines which until they were released doctor education was coming from the drug companies. We need full disclosure – is this funded by Big PhRMA.

Here is a counter argument from a pharmacist where he misapplies the stats to suit his argument:

“it depends what numbers of overdose deaths you are referring to because it is certainly not more deaths due to opioid pain medications. There were 72,000 overdose deaths which includes ALL overdoses from ALL classes of medications. Overdoses from opioids were 49,000 and within that group only 19,354 were from opioid pain relievers. Deaths from fentanyl (illicit) totaled over 29,000, heroin almost 16,000, and cocaine 14,500. (One death could be counted in more than one category, numbers from NIH.) Vietnam war deaths totaled 58,220 versus 19,354 deaths from opioid pain medications. By the way, there were 10,684 deaths due to benzodiazepines, should the CDC mandate doses and days of therapy for those also?

I have no connections with or any payments/gifts from any drug manufacturer. My only concern is that in the national noise of the ‘opioid epidemic’ the focus is on those who abuse opioids and I want to make sure that we still hear the cry of the patient who needs pain relief and who does NOT abuse the medications.”

Yes the pharmacist is correct when he says of the 72,000 deaths only 19,354 can be attributed to opioid pain relievers in 2018. Janet cited the 20 years of Vietnam deaths. The pharmacist conveniently sidesteps the time periods involved here. In three years and if the numbers stay the same (they have been increasing YOY), the numbers of opioid deaths will be slightly less than 20 years of Vietnam if it were to remain at 19,000/year. Four in five new heroin users started out misusing prescription painkillers. Of recently cited 150,000 accidental deaths, 72,000 (a record high) can be attributed to drug overdose deaths, a record high.

And this is ok?

60% of opioid deaths occur in those who were given a prescription by a physician. The other 40% of deaths are caused by people who obtained opioids by “doctor shopping,” and receive multiple scripts at once. The perceived safety and easy accessibility of these drugs have presented the highest risk for most users, even if they eventually seek out illicit opioids or “street drugs.” In 2014, only 22.1% of non-medical users obtained opioids through a doctor, meaning that the diversion rate of these drugs is very concerning. Many people are getting these medications illegally or without doctor supervision.”

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Medicaid Expansion 2018

Four states had the Medicaid Expansion on the ballot this last election and another is still fumbling around with expanding it..

The Good

Idaho: Idahoans approved Idaho Proposition 2, an initiative requiring the state to submit an amendment to the Centers for Medicare and Medicaid Services (CMS) in order to implement the Medicaid expansion no later than 90 days after the approval of the act. The Idaho Department of Health and Welfare is required and authorized to take all actions necessary to implement the provisions of this section as soon as practicable and outgoing Governor Butch Otter endorsed the ballot initiative less than a week before the election and Republican Governor-elect Brad Little has said he will implement the initiative.

Nebraska: Nebraskans voted in favor of Initiative 427 requiring the state to submit an amendment/documents seeking waiver approval from CMS on or before April 1, 2019 to expand Medicaid. As directed by the initiative, the state Department of Human Services to “take all actions necessary to maximize federal financial participation in funding medical assistance pursuant to this section”. Although newly reelected Governor Pete Ricketts has been a vocal opponent of expansion, he has stated he would let the voters decide if it made it onto the ballot.

Utah: Voters approved Utah Proposition 3 calling for the state to expand Medicaid coverage beginning April 1, 2019. The initiative also prohibits future changes to Medicaid and CHIP that would reduce coverage, benefits, and payment rates below policies in place on January 1, 2017. The proposition calls for a 0.15% increase to 4.85% from 4.7% the state sales tax (except for groceries) to finance the expansion or Medicaid and CHIP more broadly.

The Bad

Montana: Montanans voted down Montana I-185 after spending on campaigns for and against the initiative made it the most expensive ballot measure race in Montana history. The measure proposed raising taxes on all tobacco products and e-cigarettes and vaping products to dedicate a percentage of increased tax revenues for Montana’s current Medicaid program and veteran’s services; smoking prevention and cessation programs; and long-term care services for seniors and people with disabilities. The initiative also would have eliminated the sunset date for the Medicaid expansion of June 30, 2019. Republican controlled Montana State Legislature could still take action to continue the expansion program beyond June 2019. Tobacco companies had spent more than $17 million on advertising and other efforts to oppose the ballot measure, most of which came from cigarette maker Altria (Philip Morris).

The Ugly

Maine: Maine. Medicaid expansion was adopted in Maine through a ballot initiative in November 2017. Governor Paul LePage resisted the implementation of it and then complied with it after the Maine SC ordered him to submit an expansion state plan amendment (SPA) to CMS. He did submit the plan along with a asking CMS to reject the SPA. The newly elected Democratic governor, Janet Mills, has supported Medicaid expansion and is likely to move quickly to implement. Democrats also control the Maine legislature.

The ACA has shown up more in this last election even though it is pretty much a done deal and near impossible to repeal. Still Republicans repeat the same old “lies” even though they have been shot down repeatedly. One often repeated lie is the Democrats and the ACA stole $800 billion from Medicare to fund it. This lie was used by Mike Bishop in Michigan and our President also. Quite the opposite occurred with the Medicare TF being extended for a few more years and excess payments to Advantage plans reduced to match what Medicare pays out.

More to be read here: What Does the Outcome of the Midterm Elections Mean for Medicaid Expansion?

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Why Congressman Mike Bishop Lost in Michigan’s 8th District

Tom MacArthur a multimillionaire former insurance broker who negotiated the House legislation to repeal the ACA taken to the wood shed by a constituent. Tom MacArthur met with his constituents in a Town Hall meeting and he listened to them and took the abuse he rightfully deserved. Mike Bishop consistently refused to meet with his constituents face to face in a high density, Gerrymandered Republican District. People were angry and we needed the right candidate to emerge and lead. Elissa Slotkin won!

It did not have to be this way. It could have been different. MacArthur like Mike Bishop chose his political party over country and constituents. Tom MacArthur and Mike Bishop lost.

The eleven minutes to hear this rebuttal are worth hearing.

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Scratch That

I made a mistake. And it’s a good thing.

Following up on my Running on Empty post, I wanted to give a more finely-grained analysis of climate costs relative to GDP growth, so I returned to my sources to see who their sources were and how they did their calculations. Watson et al., compiled their estimate from National Centers for Environmental Information, “U.S. Billion Dollar Weather and Climate Disasters” and Paulina Jaramillo and Nicholas Muller, “Air pollution emissions and damages from energy production in the U.S. 2002-2011.”

Jacobson, Delucchi et al. presented their estimates in two tables, broken down by country. I had taken what I thought was 15% of their global climate cost estimate but it turns out that my number was roughly double theirs. I may have taken their high estimate instead of the mean. Anyway their actual estimate was around $4 trillion in 2013 dollars. But that is not the mistake I am concerned with here.

The mistake came to light after I had all the carefully checked numbers, recalculated in 2012 dollars and I compared annual GDP growth to annual health and climate costs. Climate costs exceeded growth in 13 of the 28 years from 1990 to 2017. Over the entire period those costs offset 95% of reported real GDP growth. Or so the numbers claimed.

Then I tried a different tack. I subtracted estimated annual climate costs from GDP and then calculated annual growth. To my surprise the resulting annual growth was only somewhat lower. O.K., I thought, I’m starting from a much lower total in the base year and the year-to-year number reflects only the the annual increase in climate costs and not the annual cost.

So which calculation, then, is the “right” one? Year-to-year growth minus annual cost or Year-to-year growth of (GDP minus climate cost)? Neither! Both calculations rely on double counting of the sort that Irving Fisher warned about 112 years ago.

The problem is also illustrated by the relationship between GDP and Net Domestic Product. Annual growth of Net Domestic Product and Gross Domestic Product track each other pretty closely:

Meanwhile, look at what has happened to depreciation. It has nearly doubled as a percentage of GDP, from around 9% in the late 1940s to almost 17% in recent years.

Something that doesn’t show up too well in the graph above is that most of the growth in depreciation relative to GDP has occurred in the last 48 years. So, doubling every half century we could have an economy in 125 years that runs entirely on depreciation! But that would be O.K. because GDP would be so much BIGGER then. Isn’t that right, Professor Nordhaus? Professor Solow? Professor Krugman?

I don’t have the solution to this computational problem, other than to point out that it is the inevitable consequence of a poorly-conceived metaphor for the “measurement” of heterogeneous good and services. The monetary yardstick is made of a highly elastic material and correction for changes in the cost of a basket of consumer goods (CPI) does not begin to address the real issue. GDP and GDP growth has become the increasingly opaque lens through which we view society and “the economy.” It is a cracked, scratched, smudged, distorting lens that may not even enable us to tell whether what we view through it is upside up or upside down.

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Business As Usual: Running on Empty

A little over a year ago, Robert Watson, former chair of the IPCC, and two co-authors published a report titled “The Economic Case for Climate Action in the United States.” Based on trends over the past few decades, the authors estimated the current total annual cost in the U.S. of losses from weather events intensified by climate change and health damage from fossil fuel pollution to be $240 billion, which they described as “about 40 percent of current economic growth of the United States economy.”

At around the same time, Mark Jacobson, Mark Delucchi and a carload of co-authors published an article in which they projected damages to health and property in the U.S. from climate change and pollution under “business as usual” to be around eight trillion dollars in 2050. A simple linear extrapolation between the two estimates suggests that the annual cost of climate change is increasing at around an 11 percent annual rate. Based on that extrapolation, the health and property damage cost of climate change can be projected to exceed annual GDP growth by 2026.

But wait. Watson’s 40 percent figure compares average annual damage with some of the better recent years of growth. Even excluding years of recession and stagnation, in which growth was less than $240 billion, the remaining eight of the last 12 years averaged only around $430 billion a year in real GDP growth. Counting the recession and stagnation years, it’s virtually break even.

But there’s more. Part of that economic growth simply reflects expansion of the population. Real economic growth per capita in the U.S. has been even more anemic in the 21st century. Of course this means the cost of damage can be spread more thinly as well but the crucial point is still what happens to per capita income relative to the damage.

The future is hard to predict, so I tried a number of scenarios. First, if per capita growth continues at the rate it has since 2009, the U.S. has already entered the red zone where the cost of climate change exceeds growth by an increasing amount each year. If real per capita growth accelerates to 1.5 percent per annum that fateful point won’t be reached until the year after next. A growth rate of 2 percent would postpone the day of reckoning until 2024, six years before the IPCC deadline for achieving net zero carbon emissions. To make it to 2030 without crossing permanently into the red would require a sustained rate of real per capita growth that hasn’t been achieved since 1960-1970.

One more thing. As Andreas Malm wrote, the global warming effects of fossil fuel consumption are “seriously backloaded” and “substantially deferred.” This year’s climate damage is a consequence of actions taken decades ago and the greenhouse gases emitted today will not have their full impact until decades from now. How does one estimate, then, the contribution to intermediate consumption of the deferred cost of current emissions? How much should GDP be deflated to account for the artificial inflation of nominal value added by waste gases whose cost is off the balance sheet?

Let’s assume that emissions in a given year contribute to 4 percent of climate change costs each year for the next 25 years. Why 25 years and why a constant percentage? Because it is better than attributing all of this year’s cost to this year’s emissions. Who knows? It probably makes more sense that choosing a “market-based” consumption discount rate of 4.3 percent. At any rate, considering the deferred nature of the climate costs moves the year in which GDP growth vanishes back. The 4 percent for 25 years scenario moves it back to 2007. The economy has literally been running on fumes for over a decade. Talk about “degrowth”!

It/s here. It’s not going away. It only gets worse. The question isn’t whether or not one “advocates” degrowth but whether or not one faces the stark reality and acknowledges the expiry of GDP growth and consequently the irrelevance — and, frankly, mischief — of the growth paradigm.

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