Morning Ed: World {2016.08.16.T}

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Will Truman

Will Truman is the Editor-in-Chief of Ordinary Times. He is also on Twitter.

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  1. Avatar Larry Hamelin
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    says:

    Regarding Don Winslow’s article, I’m not sure why you ask whether marijuana might be a gateway drug. Winslow does not claim that increased marijuana consumption has led to increased heroin or fentanyl consumption. You might have your tongue firmly in cheek, but still, given that a lot of people really do believe the “gateway drug” nonsense, the joke falls flat.

    Winslow does claim that the search for profitable alternatives to marijuana, made unprofitable by legalization, was a necessary component to the Mexican cartels’ entry into heroin and fentanyl. But this claim is a tiny portion of the article, and his argument is thin and entirely theoretical.

    Even if his claim were entirely true, it’s unclear what policy prescription it would entail. The naive idea that we should criminalize benign stuff like marijuana so that criminals will have an incentive to provide the benign stuff rather than more dangerous stuff like fentanyl seems absurd on its face: should we criminalize food so that criminals will supply potato chips instead of heroin?Report

    • Avatar Jaybird in reply to Larry Hamelin
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      says:

      I don’t understand the mechanism whereby marijuana consumption leads to heroin consumption.

      I know that, for myself, if I wanted to up and buy some marijuana, I know how I would go about doing it: I would go to the marijuana store.

      If I wanted to up and buy some heroin, I have no idea how I would go about doing it. I don’t have any drug dealer connections and I’m now so very boring that I don’t even know people who know drug dealers anymore. The handful of people I know who smoke marijuana either have a card (and have had it for years) or they buy it from the recreational store (now that they no longer need to have a card) and, as such, they no longer need to maintain contact with their old connections.

      Marijuana legalization means that people no longer need to know a guy who can get them heroin.

      So I’m struggling with trying to understand the mechanism whereby marijuana legalization has increased heroin usage.

      I mean, above and beyond the economics of the situation, which also don’t make sense to me.

      (Though I do recognize that heroin is, somehow, making a comeback. I don’t understand how that is tied to marijuana and no one who explains these things seems to be doing anywhere near a decent job explaining it.)Report

      • Avatar Marchmaine in reply to Jaybird
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        says:

        I believe it is a market phenomenon argument.

        Having disrupted the marijuana market, the entrepreneurs south of our borders have applied their business acumen to a new product, Heroin.

        Looking at the American drug market as it existed, Guzmán and his partners saw an opportunity. An increasing number of Americans were addicted to prescription opioids such as Oxycontin.

        And their addiction was expensive. One capsule of Oxy might sell on the street for thirty dollars, and an addict might need ten hits a day.

        Well, shit, they thought. We have some of the best poppy fields in the world. Opium, morphine, Oxy, heroin—they’re basically the same drug, so …

        The Sinaloa Cartel decided to undercut the pharmaceutical companies. They increased the production of Mexican heroin by almost 70 percent, and also raised the purity level, bringing in Colombian cooks to create “cinnamon” heroin as strong as the East Asian product. They had been selling a product that was about 46 percent pure, now they improved it to 90 percent.

        Their third move was classic market economics—they dropped the price. A kilo of heroin went for as much as $200,000 in New York City a few years ago, cost $80,000 in 2013, and now has dropped to around $50,000. More of a better product for less money: You can’t beat it.

        Add on sales/marketing… and you just have a superior product that’s cheaper and more accessible.

        Theoretically this could have happened in addition to their previous product… a diversification and market synergy project. But the precipitous 40% decline in revenues in the old market greatly accelerated that team’s budget and importance to the organization.Report

        • Avatar Oscar Gordon in reply to Marchmaine
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          says:

          If oxy is $30/pill on the street, that isn’t undercutting the drug companies, unless the cartels are pricing heroin under the insurance compensated cost of oxy.Report

          • Avatar Marchmaine in reply to Oscar Gordon
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            says:

            Well, I don’t know anything about this stuff… but just doing math (if I’ve done it right) and looking up public info on the web, it seems to me that the price per mg of Oxy legally obtained with a discount card is $0.299/mg (also seen priced between $0.125 down to $0.075); and if the price per kilo of Mexican heroin is $50k, then that’s $0.05/mg ($0.52 if we’re factoring 96% purity). So seems on the surface to be priced comparable to legal pharma sources? But yeah… I’m just googling for plausibility – I don’t know the nuances to consider. But it seems to pass the plausibility test. And, well, my little town has a huge Heroin surge, so there’s that too.Report

          • Avatar Troublesome Frog in reply to Oscar Gordon
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            says:

            That’s the price of oxy if you have a proper prescription. If you don’t and have to get it on the street, I’m sure the markup is substantial.Report

        • Avatar Jaybird in reply to Marchmaine
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          says:

          If they’re specifically targeting oxy addicts, I don’t understand how this ties into the marijuana legalization even more.Report

          • Avatar Stillwater in reply to Jaybird
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            says:

            To be fair to Esquire, the word “secret” is right there in the title.Report

          • Avatar Marchmaine in reply to Jaybird
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            says:

            Unintended consequences of legislation, Horatio.Report

            • Avatar Jaybird in reply to Marchmaine
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              says:

              I get that it happened after.
              I get that cartels were inspired to lower prices by the hit to marijuana profits.
              I get that the flooding of the market with heroin can be tied, I guess, to the legalization of marijuana like that.

              So, in that, I guess I understand the mechanism.

              I’m just not understanding how this is working demand side. I don’t see how the marijuana and heroin markets overlap.

              Oxy and heroin? Yes. I understand. And if what we’re talking about is a heroin epidemic that, roundabout, happened because the drug dealers who used to make money off of marijuana are now infiltrating the oxy crowd and stealing/killing their old customers, then I get what’s going on.

              Heck, if the market is used to 46% pure and now it is getting 90% pure, I even understand why there are a lot more ODs/deaths than there used to be and how it’s the ODs/deaths that are the difference between what we had before and what we had now…

              But that is less of a straight line from marijuana legalization than the premise seems to argue.

              Though, I suppose, I can see how, without marijuana legalization, this would not have happened… and, in that, I see how the line is being drawn between the two events.Report

              • Avatar Marchmaine in reply to Jaybird
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                says:

                Yeah, on that I’m totally ignorant. If the model is like it is in Colorado, it doesn’t make sense… is that how it is everywhere else?Report

              • Avatar Oscar Gordon in reply to Jaybird
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                says:

                Dude, it’s totally like how the rising popularity of cars directly killed the street cars/trolleys.

                Except, you know, they didn’t.Report

              • Avatar Troublesome Frog in reply to Jaybird
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                says:

                I’m just not understanding how this is working demand side. I don’t see how the marijuana and heroin markets overlap.

                They don’t have to. The demand curve doesn’t have to shift. Demand curves slope down. They’re typically not perfectly vertical. Increase the supply and you’ll get a higher quantity consumed at a lower price without any other variables at work. The new heroin buyers (or buyers of extra heroin) don’t have to have had anything to do with the marijuana market one way or the other.Report

              • Avatar Jaybird in reply to Troublesome Frog
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                says:

                Well, yeah, I get that as a stand-alone dynamic. I was still responding to the argument (or assertion, anyway) that this was somehow tied to the legalization of marijuana.Report

              • Avatar Troublesome Frog in reply to Jaybird
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                says:

                But it can be, just not necessarily on the demand side (not that I buy into this story). If you have an organized crime operation that has a large infrastructure for the smuggling and distribution of drugs, the marijuana channel going dead leaves a lot of idle resources that are primarily useful for smuggling and distributing other illegal drugs. As long as that’s still the most profitable way to use those resources, they’ll go into heroin (or meth, or whatever) distribution instead, pushing up supply.

                This is one reason why while I think marijuana legalization will be a good thing, we’ll have to go a lot further if we want to tamp down hard on the organized crime aspects of it. Smuggling and drug sales operations are good at smuggling and selling all sorts of stuff, so a bust in one market will result in at least a small boom in some others. We’ll know we’ve won when the only good use left for their resources is transporting cigarettes across state lines to avoid taxes. But for that to happen, I think you’ll need to be able to buy meth at the local 7-11.Report

            • Avatar Michael Cain in reply to Marchmaine
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              Consider this CDC map of increasing drug overdose deaths by state, and assume that’s a reasonable proxy indicator of where opioid use is increasing. There’s not a lot of overlap with the states that have moved farthest on creating legal (at the state level) means of getting marijuana. That would seem to suggest that if the choice is between illegal marijuana and illegal heroin, lowering the price of heroin shifts consumers in that direction. But if the choice is between legal marijuana and illegal heroin, not so much. Maybe the answer to Alabama’s heroin problem isn’t making marijuana illegal again in Colorado, but making it legal in Alabama.Report

              • Avatar Jaybird in reply to Michael Cain
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                says:

                Yes, exactly.

                In a place where the guy you get weed from is also the guy you get heroin from, I can see how someone might say “I’ve only got $X… might as well buy the bargain.”

                Though, honestly, switching from weed to heroin strikes me as being even more drastic a change than switching from Coors to Captain Morgan because, hey, Captain Morgan’s on sale… though, I guess, enough of a bargain is going to be enough of a bargain to switch.Report

              • Avatar Jaybird in reply to Jaybird
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                says:

                Though if your goal is blackout drunk, you might only care about what’s on sale and not really care about what your preferred method of beverage is.

                I may be looking at this all wrong.Report

              • Avatar Marchmaine in reply to Jaybird
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                says:

                This is the real question…Report

              • Avatar PD Shaw in reply to Jaybird
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                says:

                This paper doesn’t support increased use of heroin, but it does suggest that increased access to marijuana effects age cohorts differently.

                For those over 45, there is a substitution effect, with increase use of marijuana resulting in decreased abuse of alcohol and opioids, including related fatalities. For young adults, marijuana is a compliment at least for alcohol, so increased access to marijuana means both higher use of marijuana and alcohol, and increased alcohol-related poisonings and fatal traffic accidents.

                So I read this as the older person with a drug abuse problem is able to make a rational choice for himself to switch to a better drug to relax after work or for self-medication, whereas the younger person is more likely encountering drugs on a social, recreational basis. Different markets.

                http://www.econ.ucla.edu/jobmarket/2015/SmartPaper.pdfReport

              • Avatar Jaybird in reply to PD Shaw
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                says:

                Yeah. Privilege Check Time.

                I’m someone who can say (and has said) something to the effect of “oh, you only have white wine? I’ll have a water, please.”

                And so I jumped to the conclusion that “Oh, you don’t have Purple Lemonade Kush? Give me the heroin, then” was something absurd to the point of easy dismissal.

                When, really, the dynamic is more like “let’s get effed up this weekend… what’s on the menu?”Report

              • Avatar dragonfrog in reply to Jaybird
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                says:

                I don’t know to what extent the guy you get weed from is going to be the guy you get heroin from.

                I mean, if you’re already buying heroin, your dealer will probably have weed, or at least you will be well connected for weed. But in my own (very privileged) experience if you’re already buying weed, the odds are slim that your dealer will have heroin.

                I can think offhand of three people I could buy weed from – none of them would have heroin on hand or accessible as a special order; if I asked for heroin, two if not all three of them would be giving me a stern talking-to or trying to steer me toward rehab. If I were to ask around I’d probably find half a dozen more connections for weed, but I don’t know that I’d be any closer to heroin.Report

              • Avatar Will Truman in reply to dragonfrog
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                says:

                I mean, if you’re already buying heroin, your dealer will probably have weed, or at least you will be well connected for weed. But in my own (very privileged) experience if you’re already buying weed, the odds are slim that your dealer will have heroin.

                Depends on who their supplier is. If their supplier is from Mexico, and is saying “We’re getting out of the weed business, but we can sell you heroin now” then a weed dealer can turn into a heroin dealer pretty quickly.

                Then, a guy approaches his weed guy, dealer can say “Talk to a dispensary, but I have something else if you’re interested.”Report

              • Avatar Aaron David in reply to Will Truman
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                says:

                This.

                It really falls into How Deep in the Business they are. If they are selling the fruits of their own labor, making a few bucks on the side, that is one thing. If they (the dealer) are paying the mortgage/child support/DUI fines/etc. and are tapped into, say, the 14 system than they are going to change over right quick. And while your average smoker will quickly say “thanks, but no thanks” the people who have already moved up the chain i.e. meth, coke,oxy it won’t be an unwelcome offer.

                The user, and I think this is where @jaybird is is getting lost, is looking for “his high.” And for many users, MJ is enough. for others, not so much. They will (usually) travel though MJ on the way to this point, hence the gateway designation. Most will stop at a certain point, as they have found what they think/feel they are looking for, others not so much. Hence my thought that they all should be legal (among other reasons.)Report

              • Avatar dragonfrog in reply to Will Truman
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                says:

                More than that, it depends on who the dealer is.

                The folks I know who are selling:

                1) believe in their product – that is, they actually believe what they sell (weed, mushrooms, LSD, etc.) is a pleasant and relatively harmless thing. If their supplier says to them “we’re getting out of the weed business, but we can sell you heroin” then these folks are going to either find a new supplier, or get out of the business altogether.

                2) if they were to switch over, wouldn’t have much of a market – the circles they move in have mostly people who use what they sell.

                The heroin dealers already know the heroin users. If more heroin dealers are going to arise to fill a growing market space, they’re going to mostly come from among heroin users who aren’t yet selling, not from people who are comfortable around potheads.

                Note that I’m talking about folks at the bottom of the distribution chain – retail level dealers, who are selling to maybe a dozen friends to cover the cost of their own consumption, while paying their rent and groceries from their regular jobs. At that scale you’d be buying maybe half pounds and selling half to eighth ounces.

                Those who actually make their living from dealing are mostly at the tier above – to make rent out of sales that small, your apartment would have as much traffic as a retail outlet pot shop, and you’d get busted quickly. They are the ones who might switch over to heroin if that seems to make business sense – but they’re not the guy you go to for your weed, they’re the guy your dealer goes to.

                I have one friend who actually did business at that level for a time – paying their daily living expenses out of drug sales – and they didn’t have time for individual consumer sales. Even doing buys from the big distributors and sales to the retailers, they were constantly concerned about the conspicuous levels of traffic coming and going.Report

              • Avatar Marchmaine in reply to Michael Cain
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                says:

                Perhaps…also, let’s remember that Will is the one tweaking you guys by pulling on your “gateway” strings… the article is more about the total increase in Heroin in the US – the policy changes created an incentive – but the article doesn’t specifically say that that Marijuana users are all converting… just that there’s a lot more [cheaper] Heroin from Mexico coming in to the US.

                And, I’m not a statistician, but the age adjusted rate for Colorado opioid death in 2014 is worse than Alabama (or at any rate, nearly the same).

                I’m just jaybirding jaybird… sometimes we don’t know what we don’t know, and human law and human interactions are complex – no matter what the technocrats say. That doesn’t mean that making Pot illegal will put the genie back in the bottle… but maybe its ok to say that policies you like might have unintended consequences you don’t.Report

    • Avatar DensityDuck in reply to Larry Hamelin
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      The timelines don’t match. No state had legalized recreational marijuana before 2012, but the increase in heroin overdose deaths started in 2010 and has been increasing at a consistent rate since. You can say “well, they saw it coming and wanted to get people hooked on smack early”, but what’s so special about 2010 in that case? Or you can point to medical marijuana and claim that fraudulent med-mal claims were cutting into business, but that legalization activity has been going on since 1996 and 2010 was not a particularly big year for it; and heroin-overdose deaths were pretty flat before 2010.Report

      • Avatar PD Shaw in reply to DensityDuck
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        The federal government issued the Ogden memo on October 19, 2009, which was perceived as the green light for dispensaries to open and patients to register without fear of federal prosecution.Report

      • Avatar Michael Cain in reply to DensityDuck
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        says:

        Another factor that may or may not match up with the timelines was adoption in some states and localities of “priority” policies. At least anecdotally, some places in Colorado that made enforcement of small-amount possession laws a low priority saw some separation of the illegal sales channels for marijuana and for harder drugs.Report

      • Avatar Brandon Berg in reply to DensityDuck
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        says:

        This chart is probably relevant. It’s only for King County (Seattle), but it mirrors national trends. Deaths from non-heroin opioids were on the rise from the late 90s until 2010 or so, paralleling the rise in outpatient use of opioid painkillers, and until recently dwarfed deaths from heroin overdoses.

        At this point, governments started realizing that this was a big problem, and started cracking down on opioid painkiller overprescription. Now you have a bunch of people who are addicted to opioids but can’t get painkillers anymore. So they switch to heroin, and heroin deaths spike while painkiller deaths fall.Report

        • Avatar Morat20 in reply to Brandon Berg
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          When did Oxy come out? I think we had a linky awhile back pointing out that Oxycontin’s big problem was that it was an 8 hour drug marketed as a 12 hour drug. (That was it’s main selling point. 12 hours of efficacy, not 8).

          Go figure that people relying on it for pain relief started going over the dosage, when it only covered 2/3rds of the time it was supposed to.

          Incompetence and greed made a pretty nice mess of addicts right there. (Not in the nefarious “we’ll get them hooked by lying about the efficacy” manner of greed. The ‘a twelve hour drug will make bank, as opposed to drowning in a market saturated with 8 hour painkillers” way.)Report

          • Avatar Richard Hershberger in reply to Morat20
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            says:

            Oh, Oxycontin has more problems than that. (It came out in 1996, by the way.) It was marketed to doctors heavily with bogus claims that it was less habit forming than other formulations. Higher dosages were also pushed heavily, up to the knock-out-a-horse level. Something like that is appropriate for some terminal cancer patients, but that is about it. The result was overmedication resulting in addictions.

            The other problem was the “hillbilly heroin” phenomenon. The whole point of oxycontin is that it is a time-release formulation. The active ingredient is simply oxycodone, which has been around for decades. The way you make the active ingredient time-release is to encase it in a matrix of something inactive, which dissolves slowly in the stomach. You have varying thickness of the matrix, so the oxy hits the system gradually. It turns out that the physical mechanism of the oxycontin matrix was trivially easy to break. You could simply crush the pill between two spoons, and you got a nice hit of oxy. Crush one of those horse pills, and you got a stop-breathing hit of oxy. Wackiness ensues.Report

  2. Avatar Damon
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    says:

    Of course there are hit squads, either pre-planned or ad hoc. That’s a common tactic.

    While baby seals are cute. Baby sea otters rock, only exceeded by baby wombats.

    I thought the heroin epidemic was created by the massive availability of oxy?Report

  3. Avatar North
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    I will dissent from the general awws about seals. Those wretched sea rats are a plague in the north atlantic. After we idiot humans wiped out the polar bears and severely depressed the orca and shark populations the seals functionally had only one predator: Humans. Now that we’ve stopped predating them they’re exploding in population and wrecking the ecosystem.Report

  4. Avatar InMD
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    says:

    I think the government’s ambiguous stance on joining anti-ISIS fighters is actually preferable. While it should not in any manner be encouraged, I don’t like the idea of people being prosecuted for it. Granted I also think if something bad happens to someone who voluntarily travels into a war zone for combat they should be considered on their own as far as the government is concerned.Report

  5. Avatar J_A
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    says:

    The wind power is going nowhere in China is totally true, but it lacks a lot a context and background to understand.

    1. Under China energy dispatch rules, heat production in winter (more than four months) is the highest priority. Like in Europe, China uses heating district utilities, distributing centrally produced steam to houses. For historical reasons, this steam is a byproduct of coal fired power generation. Coal plants are run first in winter until all the heating demand is satisfied, only then other sources are called in. Wind is (was, last time I looked, several yeas ago) third priority.

    2. Wind sources in China are mostly located in the north, particularly Inner Mongolia and Jilin. Though relatively close to Beijing, I. M. was, and is, one of the most backward regions, with little demand of its own, and very weak connections to the national grid.

    3. In China, power generation planning is a provincial competence. Power transmission planning is a national competence. When the government in the early 2,000s mandated increased wind generation the I.M. region authorized thousands of wind projects, for which the region itself had no demand. And there were no transmission links to bring the power south. Projects to do so are now underway, but it took five years for the national planning agencies to realize the magnitude of he issue (damn communists and their five years plans – they are still the way to go in China), so the transmission links won’t be strong enough until about 2020.

    In the summer wind provides a very large portion on I.M. energy needs, but the winter steam requirements bring the coal plants in line in the windiest part of the year. Even in summer the transmission links are not enough to bring the available wind energy to Beijing, that desperately needs to shut off its coal plants (at least in summer, they still need the steam).

    The curtailment is a combination of the provincial planners successfully developing massive amounts of wind resources, as required by the government, with the total failure of the central authorities to tackle the transmission constraints.Report

  6. Avatar Marchmaine
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    says:

    Counter intuitive thought for the day:

    Everyone’s favorite right-libertarian female economics blogger wonders today whether Aetna’s announcement to pull out of the ACA in 11 of 15 states is really n-dimensional chess against the government.

    She also notes how it dovetails with Anthem’s proposed merger with Cigna:

    The government is currently suing to block both mergers; the companies would, obviously, like them to go through. The deals would consolidate an industry that currently has five major insurers down to three, giving them considerably more pricing power with both customers and providers.

    What if the government’s n-dimensional chess game against the insurers is to get three down to one… let the market absorb all the costs of merging people, process, and technology… then there was only one. Poof single payer.Report

    • Avatar DensityDuck in reply to Marchmaine
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      says:

      Yep. “Well, we tried the free-market solution, but darnit, those bastard money-grubbing profit-seekers wouldn’t stay in the program, because we made it so their executives couldn’t buy their fourth BMW and third vacation home.”Report

    • Avatar Will Truman in reply to Marchmaine
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      This was why Public Option was so hotly contested. The fear on the right that once implemented, the government would drive the number of private insurers down to 0. And some on the left for hoping the same thing.Report

      • Avatar LeeEsq in reply to Will Truman
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        The Left was not hoping for anything. What they assumed that the public option would have been much more attractive than private insurance to most people, because they were assuming something like Medicaid for people under 65, that their would be a snowball effect as hundreds of millions of people flocked to the public option.Report

      • Avatar Marchmaine in reply to Will Truman
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        says:

        Yeah, I remember those arguments… I’m wondering though if there’s a difference between 0 and 1?Report

        • Avatar Will Truman in reply to Marchmaine
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          says:

          Not much of one.

          I just wanted to get the people saying “It’ll be great the public option will make private insurance unprofitable and lead to a single-payer system” in the same room with people saying that eliminating private insurance is a conservative strawman and it’s just about insuring the people private insurance companies won’t.Report

    • Avatar LeeEsq in reply to Marchmaine
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      says:

      I’m relatively sure that liberals do not want single payer to be created via a private monopoly rather than a public monopoly. Even if you go down to one health insurance company, its still going to be one private health insurance company and the takings clause will get in the way of nationalizing it.Report

      • Avatar KenB in reply to LeeEsq
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        says:

        But since it would be a monopoly, we could regulate the hell out of it.Report

        • Avatar Marchmaine in reply to KenB
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          says:

          Exactly.

          Building a system from the ground up would have been a disaster… co-opting/regulating/nationalizing an organization that had already dealt with the complexities of administering health-care payments and benefits among and between the States and Feds and Providers? Well, that’s an entirely different project.Report

          • Avatar InMD in reply to Marchmaine
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            The problem with this theory is it assumes that the big private insurers have gotten good at navigating the system. They haven’t and they probably never will because they’re constantly under threat from different regulators with different agendas.

            Even the state level CO-OPs that were treated with kid gloves are mostly collapsing right now.Report

        • Avatar LeeEsq in reply to KenB
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          Basically like we used to do with Ma Bell. I suppose I could see this happening in theory but that would still require getting legislature through Congress. Congress would at least have to delegate powers to the Secretary of Health to regulate the remaining health insurance company.Report

          • Avatar Michael Cain in reply to LeeEsq
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            Being old enough to have worked for Ma Bell, there are pitfalls. Regulators answer to legislators, who answer to voters. Under Ma Bell, local phone service (lots of voters) was subsidized by business service and long distance (far fewer voters). Fixed rate of return regulation on prices works when it’s all one company — how that works if you have to have doctors, hospitals, the pharma companies, and the insurance company splitting the 12.5% share of the gross revenues that represents “profits” on health care may be tricky (note that Switzerland, which heavily regulates a small number of companies who choose to be in the health insurance business there, allows them zero profit on the base policy). Ma was reliable but notoriously slow about innovation — stuff didn’t get rolled out until Bell Labs was satisfied with the way it worked (the “Bell Labs of song and legend” was the research area; products were designed by smart people doing thorough work without being rushed).Report

    • Avatar InMD in reply to Marchmaine
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      Interesting thought but the federal government hasn’t given any indication that it’s financially prepared to insure the large numbers of people who don’t qualify for Medicare or Medicaid but who can’t be covered in a manner that’s profitable for the commercial plans. Many of the populations that were falling through the cracks under the pre-ACA system are too expensive for the private sector to insure. This is compounded by the fact that insurers are subject to approval at the state level. You get situations where private insurers abandon a jurisdiction due to the cost of taking on too many sick people and there’s no one there to pick up the slack.

      I think theres a strong possibility that the ACA will fail due to the incoherence of the regulatory structure and as Will said, I do think it shows that the public option would have destroyed the private competition. Whether or not that’s desirable I suppose depends on your politics.Report

      • Avatar Kolohe in reply to InMD
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        says:

        any government program can destroy private sector alternatives if the government program has enough financial backing. You dump food aid on developing countries, small farmers can’t compete. When the government in the US paved roads everywhere, the railroads quickly went bankrupt. Private SLACs are in increasing financial straits because they can’t go toe to toe with public university systems.Report

        • Avatar Chip Daniels in reply to Kolohe
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          says:

          Which in turn prompts the question-
          Why do we deliver health care via an insurance structure?
          What benefit do we gain from versus a fully public system?Report

          • Avatar Michael Cain in reply to Chip Daniels
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            says:

            I miss the deal I got in my first “real” job, one that included benefits. For hospital stuff, the company paid 90% and I paid 10%; for the rest, an 80/20 split; when my out of pocket reached a certain level, the company paid 100%. It applied to things that were medically necessary, so if it was out of the ordinary you called the company nurses who would make the decision. The nurses were pretty generous about what qualified. Simple. Straightforward. Never heard anyone say a bad word about it.Report

          • Avatar Jaybird in reply to Chip Daniels
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            says:

            Why do we deliver health care via an insurance structure?

            From “History of health care reform in the United States” from Wikipedia:

            During World War 2, the federal government introduced wages and price controls. In an effort to continue attracting and retaining employees without violating those controls, employers offered and sponsored health insurance to employees in lieu of gross pay. This was a beginning of the third-party paying system that began to replace direct out-of-pocket payments.

            Report

            • Avatar Stillwater in reply to Jaybird
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              says:

              Then there’s this from this:

              President Harry S. Truman proposed a system of public health insurance in his November 19, 1945, address. He envisioned a national system that would be open to all Americans, but would remain optional. Participants would pay monthly fees into the plan, which would cover the cost of any and all medical expenses that arose in a time of need. The government would pay for the cost of services rendered by any doctor who chose to join the program. In addition, the insurance plan would give a cash balance to the policy holder to replace wages lost due to illness or injury. The proposal was quite popular with the public, but it was fiercely opposed by the Chamber of Commerce, the American Hospital Association, and the AMA, which denounced it as “socialism.”[28]

              Foreseeing a long and costly political battle, many labor unions chose to campaign for employer-sponsored coverage, which they saw as a less desirable but more achievable goal, and as coverage expanded the national insurance system lost political momentum and ultimately failed to pass.

              So maybe it was a compromise between “fee for service” and “pure socialism” models, both of which were obviously in “demand” by the “market”? Tho I’m still uncertain how the “anti-socialism” crowd threads the freedom needle between employer-sponsored group insurance and single payer.Report

          • Avatar InMD in reply to Chip Daniels
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            says:

            The better question is why do we deliver healthcare through this insurance structure. Even if it was fully public it would probably still be an insurance type system where people are paying into it and someone is determining what’s covered and what isn’t. That’s how single payor (and old school Medicare parts A and B) work, it’s just financed through taxes of current or future beneficiaries, as applicable.

            The fundamental flaw isn’t so much that aspect of it, it’s that in this country we’ve built an incoherent hybrid public-private system with its own entrenched interests and fiefdoms. Our system of government makes comprehensive reform (which I agree is what we would do in a perfect world) really hard to get to.Report

            • Avatar Stillwater in reply to InMD
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              says:

              The fundamental flaw isn’t so much that aspect of it, it’s that in this country we’ve built an incoherent hybrid public-private system with its own entrenched interests and fiefdoms.

              Could you elaborate on that, InMD? I see things pretty much the other way: that private interests coupled with the absence of a clear, responsive market signal determine prices, therefore cost, without any PPP getting involved at all.

              Unless by “public-private hybrids” you mean the normal way policy is determined in the US: by the highest bidder.Report

              • Avatar InMD in reply to Stillwater
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                says:

                @stillwater I’m talking about the system as a whole. We’ve got Medicare covering individuals over 65 but it’s really split into 3ish systems. Parts A and B are at heart fully socialized systems where claims go directly to the federal government for payment.

                Parts C and D are programs administered by private entities. Part C will be your traditional insurers who get money from the federal government through the risk adjustment process and Part D is the prescription drug program. These entities are for profit, private entities but are also heavily regulated and depended on by the government for Medicare to work.

                Next you have your for profit plans, traditionally provided by employers, versions of which are now commercially available for individuals via the exchanges. These plans are regulated primarily at the state level. They cover everyone under 65 or who don’t qualify for Medicaid.

                Lastly you have Medicaid (including CHIP, etc.) for people with sufficiently low income which is funded by the federal government but administered by the states. Like Medicare, some Medicaid benefits are paid by claims straight to the state agency but there are also Medicaid Managed Care plans administered by private insurance companies that look a lot like Medicare Part C.

                All of these systems have their own interested parties, their pros and their cons. What we don’t have is a fundamental coherence and it can be extremely challenging to understand how they all work together, including the gaps, perverse incentives, and cost hiding that goes on between them. These gaps and perverse incentives was how we ended up with the large number of uninsured (who were putting pressure on emergency providers which operate in regulatory ecosystems of their own) that the ACA was supposed to address. The problem with the ACA is that it looks to correct the problem of the uninsured which is really just a symptom of the fact that we’ve got all of these overlapping payors (public and private) with their own incentives and prerogatives, and subject to a variety of different regulations at every level of government. The uninsured were people who fell through the cracks under the old system but by insuring them we’ve created other unintended consequences.

                My point is just that no one would create a system like this from scratch. However it’s hard to fix at the margins because of the overlap and different levels of government involved and of course scrapping it and starting over probably isn’t possible politically. Also for clarity my point isn’t that we don’t need regulation just that we need a system that covers everyone and isn’t in perpetual conflict with itself.Report

              • Avatar Michael Cain in reply to InMD
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                says:

                Just a nit — traditional Medicaid funding comes from both federal and state governments. Rich states pay 50% of the benefits, poorer states pay less on a sliding scale with Mississippi paying only 25%. The feds pay a somewhat larger share of CHIP, but not all of it. The feds pay an even larger share of expanded Medicaid.Report

              • Avatar InMD in reply to Michael Cain
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                says:

                As though my post wasn’t long enough as it was in support of such an unremarkable point. 🙂Report

              • Avatar Stillwater in reply to InMD
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                says:

                Thanks, InMD. I agree. It’s a mess.Report

            • Avatar Chip Daniels in reply to InMD
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              says:

              In addition to the existing incoherence, the employer-insurance model doesn’t seem very compatible with the short term. gig economy self employed contractor model of employment which is become more prevalent.

              I mean, after WWII someone might reasonably expect to stay with one employer like Kaiser Steel for a lifetime, but if you anticipate changing jobs 6 times, and half of those being independent contract work, the existing model may not make sense.

              The insurance model works best when the thing to be insured against is something that no one wants to happen and which can reasonably be prevented.
              And for things like car accidents and lifestyle illnesses that’s probably true.

              But pregnancy and delivery? Well baby and pediatric care? Are these really best delivered as if they were catastrophic events to be compensated with a claim?

              Or even the chronic old age illnesses and conditions; I don’t know which ailment I will eventually die from, but I know I will almost certainly get some medical condition that will be wildly expensive and terminal.

              So what form of insurance covers something so predictable and inevitable?

              A form of insurance like that stays afloat only by socializing the cost among the young and healthy.

              So what do the middlemen at Blue Cross and Aetna add to this mechanism?Report

              • Avatar Brandon Berg in reply to Chip Daniels
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                says:

                You’re right—insurance isn’t a good way of paying for routine, predictable medical expenses. Those expenses are better paid for the way we pay for routine, predictable housing expenses and routine, predictable food expenses: Out of pocket. Hence the push for high-deductible insurance.

                You are, however, wrong about there being no role for health insurance for children and the elderly. While they have higher average expenses than young adults, there’s still wide variation within those age brackets. In a given year, one three-year-old child may incur a few hundred dollars in health care costs, and another may incur a few hundred thousand dollars in costs. Solution: Health insurance with a deductible.

                Also, you ask what insurance companies do to justify their middleman fees, but you don’t apply the same standard to government. Deadweight loss from taxation is a real thing, and the cost per dollar of revenue raised increases as marginal rates increase. With marginal tax rates in excess of 50% in some jurisdictions, this is not an academic point.Report

              • Avatar InMD in reply to Brandon Berg
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                says:

                I think this is a fantasy. Significant portions of the population will never be able to pay for routine health maintenance services without being subsidized. Relying on that takes us back to the uninsured problems pre-ACA where people went untreated until the problem was catastrophic and thus much more costly for whoever ended up footing the bill.Report

              • Avatar KenB in reply to InMD
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                says:

                where people went untreated until the problem was catastrophic and thus much more costly for whoever ended up footing the bill.

                Do you have any studies/numbers to support/measure this? Though it sounds plausible, the studies I recall hearing about didn’t show any significant impact on overall health from greater access to primary care. Also, for this to be a serious justification for a policy decision, there should be some attempt to measure the costs & benefits — how many more serious conditions are averted, compared to the total cost of the additional health expenditures? There’s not unlimited money, so we should be sure we’re spending it on things that actually work and not just things that sound good.Report

              • Avatar InMD in reply to Chip Daniels
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                says:

                I agree that the employer model is outdated but there is a role in my opinion for private insurers and that is cost control. It’s what Medicare Part C and Medicaid Managed Care are (very imperfectly) experimenting with. I could see a world where risk adjusted private insurers working with ACOs or similar provider organizations get us to full coverage and save money, which as much as it sucks to say, is important.

                Of course we aren’t anywhere close to that yet but it’s that reason that I’m not sure a switch to fee for service single payor is really what we should be aiming for.Report

          • Avatar Brandon Berg in reply to Chip Daniels
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            says:

            The government not being the sole arbiter of what medical treatments get paid for (and thus ultimately which ones get researched) strikes me as a pretty important benefit of private insurance.Report

  7. Avatar Joe Sal
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    says:

    Comment check, 4th attempt.
    Guess the link I was using didn’t pass the filters earlier.Report

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