June 18, 2002
From the desk of Jane Galt:KrugmanWatch Summary Congress is considering
KrugmanWatch
Summary
Congress is considering a prescription drug benefit. The Democrats are nice and have a good plan. The Republicans are mean and have a bad plan. Neither plan is probably going to get passed.
[For which we can all humbly thank God every day -- ed.]
Highlights
-- The best part of the article describes adverse selection, which is a major problem with all types of insurance, but especially those designed to cover risks that are already known, such as current prescription drug costs; only those with above-average risk/consumption will want to buy the insurance, so the average cost goes up, so the insurance company has to raise the price to the new average cost, which means that all those with risk/consumption below the new average cost drop out. . .
-- He does a good job of describing why Medicare doesn't cover prescription drugs
Lowlights
-- He predictably shills for the Dems single payer model, but glosses over the most probable outcome of such a plan, which is to destroy the pharmaceutical market for new drugs that are primarily consumed by the elderly. Why? We've been through this before; such a plan will inevitably involve bargaining the price of the drugs consumed by those over 65 to near marginal cost, which will mean no one wants to undertake the task of researching new drugs for that market.
-- He repeats forecast numbers as if they are actually meaningful, so that he can compare them with Bush's tax cut -- and hey! Where's the guy who was complaining about the Bush administration relying on far-off cost calculations?
-- More to the point, if they're political numbers (and they are) those numbers are projected on a trendline; in other words, they assume that having someone else pay for your drugs has absolutely no effect on your consumption of drugs. Done this way, I was recently told, the current cost of Medicare would be 1/10th of what it actually is. The Dems say that their plan would cost $500 billion over ten years. Hah! Want to bet?
Predictiva Validity Test Shills for the Democrat plan; criticizes the Republican plan. PV of 1. Current PV is 8 of 10, or 80%.
Posted by Jane Galt at June 18, 2002 3:30 PM | TrackBack | Technorati inbound links"); ?>