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I periodically mock the New York Times when editors, reporters, and columnists engage in sloppy and biased analysis.

But all these instances of intentional and unintentional bias are trivial compared to our next example.

The New York Times has gone above and beyond conventional media bias with a video entitled, “How Capitalism Ruined China’s Health Care System.”

Here’s the part that caused my jaw to drop.

After the sad opening story about the guy with the sick mother, there’s a section from 1:33-2:27 that makes two observations that basically show the premise of the video is totally wrong.

  • First, it points out (from 1:33-1:42) that there is a universal, government-run health system that ostensibly covers the guy’s mother, so her unfortunate status is yet another example that coverage in a government-run healthcare system is not the same as treatment.
  • Second, it points out (from 2:05-2:27) that life expectancy soared once the communist party relaxed its grip on the economy and allowed some liberalization, which would seem to be powerful evidence that capitalism leads to better health outcomes.

These are astounding mistakes.

But it gets worse. Sarah Lilly, who lives in China, debunked the rest of the video in a column for FEE.

The New York Times…attempts to blame capitalism for the many problems in China’s health care system. …As a resident of China and a recipient of outstanding private health care here, I was confused as to why the Times would show us the horrors of a capitalist system without actually visiting a private health care facility. …All of the horrors depicted in the high-quality video—the long lines, the scalping, and the hospital fights—occurred at government-run health care facilities. …At the very least, failing to feature a single private medical facility while blaming capitalism for the dysfunction of China’s public health system is intellectually dishonest.

She points out that the big-picture analysis in the video is wrong.

In the video, the Times praises Chairman Mao’s introduction of “free” health care and claims that when capitalism was introduced into the country, the state retreated and care was no longer free. Neither statement is true. First, health care was never free; it was paid for by tax revenues. Second, the state never retreated; rather, its regulatory apparatus became vaster and even more invasive. Out of sheer necessity, China allowed for the creation of private hospitals to ease the burden of the country’s heavily bureaucratic and deteriorating health care system.

And she also explains that the details of the video are wrong.

The Times video depicts the ungodly long line most Chinese face to see a physician. …It’s an appalling scene. …There’s just one problem. The Shanghai Cancer Center is a public hospital, not a private one. The long lines, scalpers, bribes, and physical fights with hospital staff—all of these exclusively happen in the public, communist, government-run hospitals. …In an egregious bit of sleight-of-hand, the Grey Lady asserts that capitalism is ruining Chinese health care while presenting us with a hospital where capitalism is not practiced.

To be fair, we get the same type of mistake when journalists look at the flaws in the American health system. They blame capitalism when the problems of ever-higher prices and uneven coverage are the consequences of government intervention.

P.S. My columns about sloppy bias at the New York Times don’t include Paul Krugman’s writings. Debunking those mistakes requires several different collections.

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While I have no objection to applauding Donald Trump’s good policies such as tax reform and deregulation, I also don’t hesitate to criticize his bad policies.

His big missteps are protectionism and fiscal profligacy, but he also does small things that are misguided.

I’ve already written about his energy socialism and his increased handouts to the World Bank.

Today, we’re going to analyze his proposal for price controls on certain prescription drugs.

For some background on the topic, we’ll start with a very sound editorial from the Wall Street Journal. Here are the key passages.

…the U.S. shouldn’t put the world’s most innovative drug market at the mercy of what Greece is willing to pay for a cancer treatment. …a potential rule…would tether what Medicare Part B pays for certain drugs to a price index of what other developed countries pay. The goal is to bring prices down to 126% of what other countries pay, versus 180% today. …The reason European countries pay less for drugs is because they run single-payer health systems and dictate the prices they’re willing to pay. …Other countries have the luxury of extortion because the U.S. produces more drugs than the rest of the world combined. Mr. Trump mentioned these realities in his speech but blew past them to suggest importing the same bad behavior.

If we import bad policies, we import bad outcomes.

Europe does pay more—in the form of reduced access. Of 74 cancer drugs launched between 2011 and 2018, 70 (95%) are available in the United States. Compare that with 74% in the U.K., 49% in Japan, and 8% in Greece. This should cure anyone of the delusion that these countries will simply start to pay more for drugs. They’re willing to deny treatments… Better quality care in the U.S. is why America outpaces 10 European countries on cancer survival rates… Any investor who wants to bankroll the cure for Alzheimer’s is already staring at a very small chance of success—and the Trump HHS proposal adds another a potential limit on return that will be restricted further if Democrats retake power and use it as a precedent.

Here’s the bottom line.

Mr. Trump is right that Europe, Australia and many others are freeloaders on U.S. innovation, and better intellectual property protections in trade deals might help. But that is no reason to repeat their price-control mistake and undermine the reasons the United States is the last, best hope for medical progress.

Sadly, there aren’t many politicians willing to say and do the right thing.

Which is why Congressman Bucshon of Indiana deserves praise. Here are some details from a report by the Hill.

Rep. Larry Bucshon (R-Ind.) on Friday criticized a drug pricing proposal President Trump made last month, marking some of the first public resistance to the move from congressional Republicans. Bucshon told The Hill that Trump’s proposal to lower some drug prices in Medicare by tying them to cheaper prices in other countries is too far of a move toward “price controls.” …“I understand that we do want to get drug prices down but I think that any proposal that would lead to government price-fixing in that space is a pathway we don’t want to follow.” Trump’s move, announced in October, went farther in the direction of price controls on drugs than what Republicans typically support. Some Democrats praised his move… Bucshon helped lead opposition to a somewhat similar Medicare drug pricing proposal from former President Obama in 2016.

Amen.

A bad Obama policy of intervention doesn’t suddenly become a good policy simply because Trump has adopted it.

Here’s some of what I wrote about the issue in a column for FEE.

…prescription drug prices are typically higher in the US than many other nations. That’s both because bad domestic policies restrict the kind of competition that would keep prices in check and the fact that many foreign governments enact price controls while threatening to steal patents from companies that don’t cooperate. So, it’s especially troubling to see a proposed rule from the Trump administration that would index prescription drug reimbursements under Medicare Part B—which covers drugs exclusively handled by physicians and hospitals like vaccines and cancer medications—based on the prices paid in other countries, including those with nationalized health care systems. To borrow a legal metaphor, it’s fruit of the poisonous tree.

And what happens when we import bad policies?

At stake aren’t just high-minded free-market principles but the vitality of the most innovative pharmaceutical market in the world. US drug companies have only weathered the abuses of foreign governments because the domestic market is large enough that they can recoup the losses. That’s why the president is right to call it “very, very unfair” for other countries to keep their prices artificially low at the expense of American patients; but importing those losses by allowing foreign abuses to set US prices will mean no more market in which to offset losses to socialized systems and thus an inevitable decline in research and development of new medications.

What’s the bottom line? As I noted, we’ll get bad results.

From rent control to the gasoline lines of the 1970s, the connection between price controls and shortages has been well established.

In the case of pharmaceuticals, I fear the main result will be a decline in innovation. The drug companies make nice profits in drugs that already are developed and approved, so I doubt they’ll have much incentive to withhold production on existing drugs if price controls are imposed.

But those profits help to offset the very high cost of development and testing. Including for all the research and development that doesn’t produce marketable products.

So the real victims will be all of us since we won’t have access to the potentially life-saving and life-improving drugs that might be created in the future – assuming an absence of price controls.

The economics of price controls are clear. The consequences are always bad, whether we’re looking at price controls on labor, price controls on gasoline, or price controls on other products.

Which is why such policies generally are supported by the world’s most economically illiterate governments (or, in the case of Nixon, the most venal politicians). Oh, and don’t forget Puerto Rico.

We need Ludwig Erhard, but we got Donald Trump.

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When I argue with my statist friends about the proper size and scope of government, they accuse me of not wanting public services.

My typical response is to explain that I am a strong supporter of markets as the method to get high-quality roads, schools, and healthcare.

But I’m wondering whether this answer pays too much attention to the trees and doesn’t focus on the forest.

After all, the debate isn’t whether we should be Liberland or Venezuela. It’s whether government should be bigger or smaller compared to what we have now.

So the next time I tussle with my left-leaning buddies, I’m going to share this chart (based on data from the IMF’s World Economic Outlook database) and ask them why we can’t be like the fast-growing, small-government nations of Asia.

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To elaborate, not only do jurisdictions such as Hong Kong and Singapore enjoy impressive growth, they also get very high scores for infrastructure, education, and health outcomes.

In other words, these nations are role models for “public sector efficiency.”

What they don’t have, by contrast, are expensive welfare states that seem to be correlated with poor outcome for basic public services.

For all intents and purposes, I want to focus the debate on how much government is necessary to get the things people want, sort of like I did in Paris back in 2013.

I asked the audience whether they thought that their government, which consumes 57 percent of GDP, gives them better services than Germany’s government, which consumes 45 percent of GDP. They said no. I then asked if they got better government than citizens of Canada, where government consumes 41 percent of GDP. They said no. And I concluded by asking them whether they got better government than the people of Switzerland, where government is only 34 percent of economic output… Once again, they said no.

I assume (hope) Americans also would say no given these choices. And hopefully they would say yes when asked if we should be like Hong Kong and Singapore.

P.S. If I rotated the above chart clockwise by 90 degrees we’d have a pretty good approximation of the downward-sloping portion of the Rahn Curve.

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Back in 2012, I shared a chart showing that workplace deaths declined substantially after the creation of the Occupational Safety and Health Administration.

But I then shared a second chart showing that workplace deaths declined just as much before OSHA was created.

The moral of my story was quite simple. Deaths primarily fell because America become much more prosperous. And there’s a lot of evidence that wealthier is healthier.

Today, let’s look at a similar example.

A study published by the National Bureau of Economic Research looks at the impact of public health measures in the early 1900s. They start by sharing some good news.

Since the mid-19th century, mortality rates in the Western world have plummeted and life expectancy has risen dramatically. Sometimes referred to as the mortality transition, this development is widely recognized as one of the most significant in the history of human welfare (Fogel 2004). Two features characterize the mortality transition. First, it was driven by reductions in infectious diseases and diseases of infancy and childhood (Omran 2005; Costa 2015). Second, it was concentrated in urban areas.

Do government policies deserve the credit?

There’s some evidence for that hypothesis.

…recent reviews of the literature emphasize the role of public health efforts, especially those aimed at purifying the water supply. For instance, Cutler et al. (2006) argue that public health efforts drove the dramatic reductions in food- and water-borne diseases at the turn of the 20th century. Similarly, Costa (2015) argues that clean-water technologies such as filtration and chlorination were “the biggest contributor[s] to the decline in infant mortality”

To be sure, there were huge public projects in the first several decades of last century. Here’s the data on sewage treatment facilities.

And here’s some data on milk purification efforts.

And the study has data on other aspects of public health as well.

The key question is whether all these efforts were successful. The three authors decided to investigate.

Using data on 25 major American cities for the years 1900-1940, the current study revisits the causes of the urban mortality decline at the turn of the 20th century. Specifically, we conduct a statistical horse race that attempts to distinguish the effects of ambitious, often extraordinarily expensive (Costa 2015, p. 554), public health interventions aimed at controlling mortality from food-and-water-borne diseases. Following previous researchers (Troesken 2004; Cutler and Miller 2005; Beach et al. 2016; Knutsson 2018), we explore the extent to which filtering and chlorinating drinking water contributed to the decline in typhoid mortality observed during the period under study and, more generally, to the observed declines in total and infant mortality. In addition, we explore the effects several other municipal-level efforts that were, at the time, viewed as critical in the fight against typhoid and other food- and water-borne diseases (Meckel 1990; Levitt et al. 2007; Melosi 2008) but have not received nearly as much attention from modern-day researchers. These interventions include: the treatment of sewage before its discharge into lakes, rivers and streams; projects designed to deliver clean water from further afield such as aqueducts and water cribs; requirements that milk sold within city limits meet strict bacteriological standards; and requirements that milk come from tuberculin-tested cows. Because the urban mortality transition was characterized by substantial reductions in infant and childhood mortality (Omran 2005) and because exclusive breastfeeding was not the norm during the period under study (Wolf 2001, 2003), improvements in milk quality seem a particularly promising avenue to explore.

But here’s the surprising result.

They did not find much evidence that public health efforts made a difference.

…our results suggest that the building of a water filtration plant cut the typhoid mortality rate by nearly 40 percent. More generally, however, our results are not consistent with the argument that public health interventions drove the extraordinary reductions in infant and total mortality observed between 1900 and 1940. Specifically, we find that efforts to purify milk had no appreciable effect on infant mortality and no effect on mortality from non-pulmonary tuberculosis (TB), which was often transmitted through infected milk. Likewise, neither chlorinating the water supply nor constructing sewage treatment plants appears to have been effective. …Our results point to other factors such as better living conditions and improved nutrition as being responsible for the sharp decline in urban mortality at the turn of the 20th century.

Here’s the chart showing that infant mortality consistently declined, largely independent of public health efforts.

I’m not suggesting, by the way, that public health spending is bad. Nor am I asserting that it’s a waste of money.

Notwithstanding some of the jokes that target libertarians, the goal isn’t to abolish every regulation or program governing safety and health. Maybe I’m a bad libertarian, but I’d pick a city with sewage treatment over one without.

But my main point is that I don’t need to make that choice. Nobody does.

The data strongly suggests that economic growth and rising levels of prosperity are the real drivers of improved health outcomes. Market-driven prosperity is what generates the wealth needed to improve public health, whether the actual delivery takes place via public or private action.

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America’s healthcare system is a mess, largely because government intervention (Medicare, Medicaid, Obamacare, and the tax code’s healthcare exclusion) have produced a system where consumers almost never directly pay for their medical services.

This “third-party payer” system basically means market forces are absent. Consumers have very little reason to focus on cost, after all, if taxpayers or insurance companies are picking up the tab for nearly 90 percent of expenses.

As a result, we get ever-higher prices.

But we also get a lot of featherbedding and inefficiency because providers want to take advantage of this system.

Athenahealth offered some sobering analysis on the system last year.

The number of physicians in the United States grew 150 percent between 1975 and 2010, roughly in keeping with population growth, while the number of healthcare administrators increased 3,200 percent for the same time period. Yes, that’s 3,200 percent in 35 years…the growing number of administrators is…driven by…ever-more-complex regulations. (To cite just a few industry-disrupting regulations, consider the Prospective Payment System of 1983; the Health Insurance Portability & Accountability Act of 1996; and the Health Information Technology for Economic and Clinical Act of 2009.) Critics say the army of administrators does little to relieve the documentation burden on clinicians, while creating layers of high-salaried bureaucratic bloat in healthcare organizations.

And here’s the chart that succinctly captures so much of what is wrong with America’s government-distorted healthcare regime.

By the way, the chart implies that the rising number of administrators is driven by additional regulations from Washington. I certainly won’t disagree with the notion that more red tape is counterproductive, but I suspect that third-party payer is the primary cause of the problem.

Third-party payer is what causes prices to climb, and then the government and insurance companies respond with various cost-control measures that require lots of paperwork and monitoring. Hence, more administrators.

In other words, third-party payer is the problem and regulations and administrators are both symptoms.

I’ll close by noting that I shared a version of this chart last year and warned that the numbers might be exaggerated. But there’s no question about the trend of more bureaucracy, red tape, and inefficiency.

P.S. Because it’s so important to fix the third-party payer problem, I’ve actually defended one small provision of Obamacare.

P.P.S. Here’s how genuine free markets result in lower costs for healthcare.

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I very much suspect Obama partisans and Trump partisans won’t like this column, but the sad reality is that both Obamacare and Trump’s protectionism have a lot in common.

  • In both cases, government is limiting the freedom of buyers and sellers to engage in unfettered exchange.
  • In both cases, the fiscal burden of government increases.
  • In both cases, politicians misuse statistics to expand the size and scope of government.

Today, let’s add another item to that list.

  • In both cases, the Washington swamp wins thanks to increased cronyism and corruption.

To see what I mean, let’s travel back in time to 2011. I wrote a column about Obamacare and cited some very persuasive arguments by Tim Carney that government-run healthcare (or, to be more accurate, expanded government control of healthcare) was creating a feeding frenzy for additional sleaze in Washington.

Congress imposes mandates on other entities, but gives bureaucrats the power to waive those mandates. To get such a waiver, you hire the people who used to administer or who helped craft the policies. So who’s the net winner? The politicians and bureaucrats who craft policies and wield power, because this combination of massive government power and wide bureaucratic discretion creates huge demand for revolving-door lobbyists.

I then pointed out that the sordid process of Obamacare waivers was eerily similar to a passage in Atlas Shrugged.

Wesley Mouch…issued another directive, which ruled that people could get their bonds “defrozen” upon a plea of “essential need”: the government would purchase the bonds, if it found proof of the need satisfactory. …One was not supposed to speak about the men who…possessed needs which, miraculously, made thirty-three frozen cents melt into a whole dollar, or about a new profession practiced by bright young boys just out of college, who called themselves “defreezers” and offered their services “to help you draft your application in the proper modern terms.” The boys had friends in Washington.

Well, the same thing is happening again. Only this time, as reported by the New York Times, protectionism is the policy that is creating opportunities for swamp creatures to line their pockets.

The Trump administration granted seven companies the first set of exclusions from its metal tariffs this week and rejected requests from 11 other companies, as the Commerce Department began slowly responding to the 20,000 applications that companies have filed for individual products. …several companies whose applications were denied faced objections from American steel makers. …companies that have applied for the exclusions criticized the exercise as both long and disorganized. “This is the most screwed-up process,” said Mark Mullen, president of Griggs Steel, a steel distributor in the Detroit area. “This is a disservice to our industry and the biggest insult to our intelligence that I have ever seen from the government.”

From an economic perspective, it certainly is true that this new system is “disorganized” and “a disservice” and an “insult to our intelligence.” Those same words could be used to describe the welfare state, the EEOC, farm subsidies, the tax code, and just about everything else the government does.

But there’s one group of people who are laughing all the way to the bank, The lobbyists, consultants, fixers, and other denizens of the swamp are getting rich. Whether they’re preparing the applications, lobbying for the applications, or lobbying against the applications, they are getting big paychecks.

And the longer this sordid protectionist process continues, we will see a repeat of what happened with Obamacare as senior-level people in government move through the revolving door so they can get lucrative contracts to help clients manipulate the system (yes, Republicans can be just as sleazy as Democrats).

Washington wins and we lose.

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I try not to pay much attention to the staffing decisions of President Trump’s “Boston-phone-book presidency.” Yes, I realize those choices are important, but my focus is policy.

As such, I don’t have any strong opinions on the ouster of David Shulkin, the now-former Secretary at the Department of Veterans Affairs. But I definitely have something to say about whether America’s military vets should be consigned to an inefficient (at best) and costly form of government-run healthcare.

We should never forget that the VA put vets on secret – and sometimes fatal – waiting lists. And then the bureaucrats awarded themselves big bonuses. That is horribly disgusting.

By the way, the VA scandals haven’t stopped.

Here are some excerpts from a report in USA Today.

A USA TODAY investigation found the VA — the nation’s largest employer of health care workers — has for years concealed mistakes and misdeeds by staff members entrusted with the care of veterans. …In some cases, agency managers do not report troubled practitioners to the National Practitioner Data Bank, making it easier for them to keep working with patients elsewhere. The agency also failed to ensure VA hospitals reported disciplined providers to state licensing boards. In other cases, veterans’ hospitals signed secret settlement deals with dozens of doctors, nurses and health care workers that included promises to conceal serious mistakes — from inappropriate relationships and breakdowns in supervision to dangerous medical errors – even after forcing them out of the VA. …The VA has been under fire in recent years for serious problems, including revelations of life-threatening delays in treating veterans in 2014 and efforts to cover up shortfalls by falsifying records.

So what’s the answer? How can we fix a dysfunctional bureaucracy?

The honest answer is that we can’t. Inefficiency, sloth, and failure are inherent parts of government (yes, the free market also is far from perfect, but at least there’s a profit-and-loss incentive that rewards good firms and punishes bad ones).

So it’s time to get the private sector involved. Though I noted in the TV discussion that not all privatization is created equal. If the government simply contracts with selected healthcare providers, that could be a recipe for cronyism since politicians would try to help their campaign contributors.

I much prefer the advance-funding model developed by Chris Preble and Michael Cannon, which would give active-duty service members added money, up front, to purchase a benefits package to cover future costs related to their military service.

For what it’s worth, former VA Secretary Shulkin, in a recent column for the New York Times, was very critical of privatization. But it isn’t clear whether he was referring to the contracted-out version or the advance-funding version.

I am convinced that privatization is a political issue aimed at rewarding select people and companies with profits, even if it undermines care for veterans. …individuals, who seek to privatize veteran health care as an alternative to government-run V.A. care, unfortunately fail to engage in realistic plans regarding who will care for the more than 9 million veterans who rely on the department for life-sustaining care. …privatization leading to the dismantling of the department’s extensive health care system is a terrible idea.

But even if you accept that he’s criticizing the less-preferred from or privatization, he definitely likes throwing rocks in a giant glass house considering the VA received ever-larger amounts of money and generated a horrible track record.

As I said at the end of my interview, a private healthcare provider might get a contract via cronyism, but it still would be a better option for vets since that company presumably wouldn’t let them die on secret waiting lists.

And since the advance-funding option obviously would be for future veterans, we do need a better market-based approach for current veterans.

I’ll close by sharing a Politico article on the infamous boondoggle that got Shulkin in trouble.

Veterans Affairs Secretary David Shulkin’s chief of staff altered an email to create a pretext for taxpayers to pay for Shulkin’s wife to accompany him on a 10-day trip to Europe last summer, the agency’s inspector general reported… The report by Inspector General Michael Missal also claims that Shulkin improperly accepted a gift of Wimbledon tickets during the trip, and a VA employee’s time was misused planning tourist activities for Shulkin and his entourage. …the VA paid for Shulkin’s wife’s airfare, which cost more than $4,300.

This obviously does not reflect well on Shulkin. But the real scandal almost certainly is that the trip to Europe occurred. We don’t know how many bureaucrats participated and what supposedly was going to be achieved by this junked, but I’m guessing the total tab was enormous and the total value was zero. The fact that taxpayers also were saddled with the cost of Shulkin’s wife’s trip merely added insult to injury.

P.S. Since money isn’t unlimited, I think the focus should be on helping veterans injured in battle rather than providing lavish benefits to anyone and everyone who ever wore a uniform.

P.P.S. I mentioned in the interview that the VA is run for the benefit of its bureaucrats. If you doubt me, check out this double-dipping bureaucrat with the triple-dipping scam.

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