Friday, November 6, 2015

Annals of Derp: Faint praise

Update: Slightly revised for intelligibility

Reginald Denny in Harry A. Pollard's Oh, Doctor! (1925)
David Brooks congratulating America on its success in getting a grip on health care inflation, but with a couple of caveats: (a) it ain't happening, and (2) well, maybe it is, but Obama and the Affordable Care Act shouldn't get any credit for it.

The funniest bit is with reference to the first of those, where he takes a number for the current health costs inflation rate in the US, 1.1%, and next year's projected number for health costs inflation growth rate, 6.5%, and practically faints, because ZOMG that's a scary surge:

Namely, in paragraph 3, with data from the Council of Economic Advisers,
“Health care prices have grown at an annual rate of 1.6 percent since the Affordable Care Act was enacted in March 2010, the slowest rate for such a period in five decades, and those prices have grown at an even slower 1.1 percent rate over the 12 months ending in August 2015”
and then in paragraph 12, with data from "some firms":
The most recent numbers have indicated a scary surge in health care prices, and some firms are projecting 6.5 percent inflation for 2016.
You can just see his eyes lighting up, with the sense that he's discovered something really sensational—1.1 to 6.5%, that's a big fucking deal!— only he hasn't bothered to look at the charts. Oops! The source for the inflation growth rate, HealthLeadersMedia on a new report from PricewaterhouseCoopers (apparently they took on so much debt in the last round of mergers that they had to sell off their capital W's) just has some pretty good, though not unmitigated, news:
The good news is that the projected 6.5% increase in healthcare inflation in 2016 is almost half the cost growth of 11.9% in 2007, when PwC first started making its annual projections. The bad news is that 6.5% cost growth is wildly outpacing wage growth [of around 0%]....
Scary projected surge from 6.8% to 6.5% in that PwC report

And the Council of Economic Advisers chart of inflation itself has some more:

No surges anywhere, as you see, just two distinct but entirely steady declines (even if the one for inflation growth rate isn't quite steep enough to please the accountants). Brooks is like a fool finding out that his temperature was 98.6 yesterday in New York and 37 today in Paris and panicking: "Give it to me straight, Doctor, am I still alive?"

The other thing is the implication that Obamacare can't possibly be given the credit for the improvements, because other countries are seeing them as well:
the reduction in health care cost growth seems to be global. Health cost growth has slowed in just about every high-income country since 2000, possibly as efficiencies are passed from place to place.
Unfortunately for his reputation, he links to a post at Tyler Cowen's blog, not that there's anything wrong with that, but all but about 15 words of Cowen's post are taken from an article in the Times, by Margot Sanger-Katz for the Upshot, and if he'd bothered to look at the original he'd have seen a couple of useful points that aren't relevant to the point Cowen wants to make, but show that the point Brooks wants to make is totally wrong:
  • that the worldwide slowdown in health care inflation goes back to the 1990s (and Clinton's cost-containment measures), not just to 2000; and
  • that the other OECD countries have reduced cost inflation not in spite of their lack of an ACA (which might have showed that the ACA is unnecessary), but because they have regulation that is still stricter and more effective than ours:
Other countries also have political mechanisms to reduce spending. With great political controversy, the Affordable Care Act tries to mimic some of these mechanisms, such as a board of experts that will consider whether treatments are effective. Most other countries have aggressive regulatory systems that allow government officials to tamp down health spending directly when times get tough.
  • And of course if the other OECD countries aren't doing any better at reducing health cost inflation than the US, keep in mind that their baseline problem, the amount health care costs their economies, is way less serious; they have a lot less reason to worry about it.

The health spending growth rate in the US has long been pretty normal, but the raw amount we spend is in a different galaxy. Via OECD.

Update via Wikipedia, on what the "rate of increase in inflation" is and why it is such a weird statistic:
U.S. President Richard Nixon, when campaigning for a second term in office announced that the rate of increase of inflation was decreasing, which has been noted as "the first time a sitting president used the third derivative to advance his case for reelection."[3] Since inflation is itself a derivative—the rate at which the purchasing power of money decreases—then the rate of increase of inflation is the derivative of inflation, or the second derivative of the function of purchasing power of money with respect to time. Stating that a function is decreasing is equivalent to stating that its derivative is negative, so Nixon's statement is that the second derivative of inflation—or the third derivative of purchasing power—is negative.
Nixon's statement allowed for the rate of inflation to increase, however, so his statement was not as indicative of stable prices as it sounds.

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