Monday, December 23, 2013

Steven Brill represents everything wrong with economic reporting...

His big expose on the health care industry has gotten a lot of play, and yet it is based on two baseless premises. 1) That the list price matters. As in college prices, the list price really has little to do with the actual prices people pa y, and while there are some effects due to list price, they are 2nd order. 2) That hospitals have excess profits. A lot of the examples that he cites are non-profit hospitals. So to say a non-profit organization has excess profits is non-sensical. Profits are zero. What he calls profits, is basically spending on investment, and typically we think investment is a good thing. It is possible that the investment is wasted, but he provides no evidence for that.

His recent follow up is just as bad, accusing the Obama administration for being slow to implement the regulations from Obamacare. Claiming that they could have been issues the day after the law was signed. But regulations never happen that way. They always tend to take 3-7 years, because regulations are always challenged in court, and any regulation issued hastily will be more likely to be overturned. Much of the environmental regulations that Obama touts and takes credit for were based on laws that I worked on in 2007.

It's just wilful ignorance to not acknowledge that.

Elizabeth Rosenthal of the NY Times has written basically the same story and makes the same mistakes. She is on the radio right now ranting about all the tax breaks non-profits get. Although most taxes are only levied on a company's profits. And again, since non-profits don't have any profits, that too is moot.

It just pains me that this idea of hospital list price has captured so much of the national conversation and that pundits like Rosenthal and Brill speak nonsense with such confidence. There are real problems in the economics of the health care system, but the media has focused on one of the most irrelevant ones.

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