Economics is, as Prof. DeLong of U.C. Berkeley said, about learning from history. I was on MarketWatch.com and found an interesting video titled, "Why History Suggests Health-Reform May Work." http://www.marketwatch.com/video/asset/why-history-suggests-health-reform-may-work-2010-01-06/6904F93B-E7C2-41B6-B3D6-2BE16C9B6EB0 The video looks at the introduction of Medicare and any benefits that it has produced to hypothesize whether or not Obama's new Health-Reform would work. Medicare is a social insurance program provided by the U.S. Government for those citizens over the age of 65. In the video, David Wessel, Economics Editor of the "Wall Street Journal", explains the lessons of the Medicare Subscription Drug Benefit, the biggest expansion of government health care since Medicare was created. He says that this MSDB, introduced 4 years ago, subsidized drug coverage.
The first lesson to be learned, according to Wessel, is that "Markets actually do work." By allowing people to choose between different companies, "competition pushed down price." The second lesson is that "Incentives matter." The insurance companies no longer felt like they had a monopoly and instead had to focus on attracting customers. Prices of generic drugs lowered greatly because of the companies' incentives to lure more customers. The third lesson to be learned, according to Wessel, is that it is "Hard to predict the cost for these types of programs. As we see from looking at the MSDB, it was predicted on the high end. This program today costs 1/3 LESS than its estimate when it passed.
I found this video interesting because it included many of the things that we have talked about so far in class. It used history, recent as it may be, to look at a proposed bill and see what it will do economically--whether it will "work" or not. Also, David Wessel included Mankiw's principles: "markets work" and "incentives matter." It was cool to see these concepts being looked at and applied in real life.
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I agree with Cierra, it is really cool to see something from recent history being applied to economics today. As we learned in Ch.2, economists can use lab data, they have to take the data history provides.
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The only way for Economists to know what policies will and will not work in the market is to look at what has already happened. This article shows just this. We see that the MDSB has offered the elderly incentives in that they are able to purchase cheaper generic drugs along with the fact that because of competition between companies prices are lowering for medical insurance. Through markets, companies are able to organize economic activity and through incentives they lure people to purchase their product or service. T
ReplyDeleteI wonder how much longer our country is going to put off health care coverage for all. It seems like it would be to our national interest to invest in the health of our own people... I think that we just need to market healthcare in a new way to be a long term investment. Economically speaking I believe preventative medicine, regular doctor's check ups, nutritional education could offset the cost of overhauling healthcare in a few years.
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Although the majority of Democrats are willing to support the current health reform legislation, many Progressives have come to reject what is an all too market-centered approach. Our system of health care and insurance is a blatant reminder that not everything that could have a market should have a market. Despite the arguments made by Wessel and the proponents of the current bills, there are far better sources to turn to for a history of successful health care reform: any other modern, industrialized country. When Europe and Asia can provide cheap, quality health care to their entire populaces through either extensively regulated care and insurance, or through outright government control, for less than it costs us, there should be no question as to the models to emulate. Except the various industries involved have great means to influence lawmakers, not to mention an American populace easily spooked by the specter of Socialism.
ReplyDeleteOne ready example of the failure of the market is the significantly higher prices of prescription drugs in the United States. It is common knowledge that far more capital is invested in the marketing of many of these drugs than any substantive research, and the American consumer has come to expect to be charged a great deal for their medication. Amendments were recently introduced to the health care bills allowing drug reimportation, from countries such as Canada, saving the average American a great deal on their drug costs. However, the American pharmaceutical industry has lobbied vehemently against this to be able to continue their milking of the American public. Talk of reimportation was quickly voted down as Republicans shouted that we could not be sure as to the safety of such drugs (completely incorrect), and Democrats standing behind the Obama administration, which negotiated with the pharmaceutical industry behind closed doors for their support in early 2009, with one of the results being the dismissal of reimportation.
The invisible hand of the free market, like that of democracy, relies on an informed an active populace, without which actors can get away with a great deal. (E)
Economic trends are so hard to project. I imagine a health care reform plan's success would be quite similar. History has proved itself to be one of the best means by which to form educated guesses. *Crosses fingers*. (E)
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