Monday, January 31, 2011

Microsoft Musing

I caught this courtesy of Brad DeLong:
"Every quarter Microsoft reports earnings, and every quarter it reports a massive loss in its online operations. Today it reported a $543 million loss for its December quarter. This gives Microsoft a trailing-four-quarter loss of $2.5 billion. That's simply astounding. We've asked it before, and we'll ask it again: Has any company lost as much money online as Microsoft?"
This blows my mind. I am sure this is more than just Bing and Internet Explorer but both suck tremendously. Ironically Bing is the default search engine of my Android phone (courtesy of Verizon apparently getting boatloads of money from Microsoft to make it so).

Less Care or Greater Productivity?

There is a fundamental assumption in health care reform that "bending the cost curve" is synonymous with reducing care*. For example see this very thoughtful post from Donald Taylor**. I think this assumption leads most health care experts to focus on empowering some omniscient bureaucrat (whether employed by the federal government or by an insurer) to wisely decide how to maximize the returns on our health care dollar by only spending on high bang for the buck procedures. This view precludes the notion that productivity gains could drive down costs. In health care the conventional wisdom holds that technology only drives prices up (it may also enhance quality but at a significant premium). I wonder how much of this is driven by the fundamentals of health care financing as opposed to actual delivery? The areas of health care where insurance is not the normal means of financing care such as plastic surgery or dental care have shown significantly lower cost growth than the rest of health care. Or if you look at something like Lasik eye surgery there has been both an increase of quality, utilization accompanied with price decreases. Obviously insurance should play an important role in health care but the important question is what role? Should we be subsidized to purchase a product that adds parties to a routine and predictable transaction? No. We should focus on ensuring that when something that unexpectedly causes one to incur great expenses that he does not end up in the poor house.

*I do believe that part of bending the cost curve will be better utilization of care and this will necessarily entail some reduction in the care provided. But I can't help but wonder if how health care delivery is financed holds back some potential productivity enhancing measures.

**If you are interested in health care policy Donald Taylor's blog is a must read. He has considerable expertise in health care policy but also has a keen read on the politics of health care. He has a very provocative compromise proposal that I will blog in a bit but you should definitely read now.

Thursday, January 27, 2011

The Great Stagnation

Tyler Cowen has a kindle single (a small e-book) out called "The Great Stagnation". I haven't read it but hope to soon and will report on it once I do. That said, it appears one of the basic premises is that innovation has stalled or declined. It's an interesting premise because I think it is a very debatable premise. I look at my life at almost thirty and if I were to bisect my life into two 15 year terms the second term appears to me to be the one where a lot more amazing things have happened.

I recently purchased a smartphone (I don't know how I ever lived without it). 15 years ago I had a cd player. If I wanted to carry my music collection then I needed to transport a book of cds. I had a desktop that had dial up and internet was glacial compared to what it is now. I had just started emailing and surfing the web but the notion of doing that while riding the metro or waiting for my coffe was unimaginable to me. I didn't have a navigation tool other than a map book (I was either unaware of mapquest or it didn't exist yet). My go to basic reference guide was encyclopedia brittanica. Video chats was not something I was aware of then (I am guessing it existed but was probably exorbitantly expensive and probably unreliable). Voice recognition, I doubt it. If I wanted a book for leisure reading I needed to bring that with me (a choice of books, had to of course bring those too). Amazon existed so I could buy stuff readily. Cell phones were rare and to the extent they existed were massive and expensive. Now, I have this little thing that is 3"x6" has a beautiful display (AMOLED) and barely weighs anything and can carry more music than I could have, has as much data at my fingertips than I could have dreamt of, access to thousands of books, phenomenal connectivity and speed, and a million other things for a pittance. The functionality that this little device I would have, or more accurately, begged my parents to spend thousands of dollars for. My guess is that such a device if it had existed then would have cost over $10,000. Now it can be had for maybe $500 without signing up for a plan and as low $0 with a cell plan. The marginal cost over what my parents paid for dial-up and long distance is negative. I am sure that my cell and data plan today costs less than their landline and dial up did back then. That is amazing to me. To me that sounds like a lot of innovation.

Wednesday, January 19, 2011

Nevermind, Repeal HCR

Ezra Klein has a post begging us to remember the story of Deamonte Driver when we think of the plight of the uninsured. For those unfamiliar with Deamonte's tragic story, Deamonte was a 12 year old who passed away several years ago as an abcess in his tooth which then spread to his brain, multiple operations and $250,000 later Deamonte died from what could have been solved by a routine tooth extraction. The only problem with Ezra's plea is that Deamonte was covered under medicaid and area dentists that accept medicaid are few and far between. Medicaid is crap and health care reform is expanding it. What we should be doing enabling people to buy catastrophic coverage to protect them from a medical bankruptcy, and providing cash support to cover the deductible for those who are lower income. What if Deamonte's mother could have walked into a dentist's office and said that she was prepared to pay the $100 for a tooth extraction there on the spot, the dentist wouldn't have to wait six months to get reimbursed by medicaid? My guess is that Deamonte would be alive. Ezra Klein has been a tireless advocate for the uninsured and has brought a lot of light to the health care debate, but this is a post that he will forever regret as it is beyond stupid.

I don't think we should actually repeal HCR, but if we are creating insurance exchanges and then also subsidizing the purchase of insurance, why have medicaid? Or at least why not reform medicaid away from this centrally planned price setting model to one that is cash based. Give people a health debit card. Something along the lines of Marty Feldstein's proposal.

Update: I just reread Ezra's post and it still totally blows my mind. He owes his readers an apology. This is the type of error that gets right wingers nominated for stupidest person alive by Brad DeLong.

Reform, Don't Repeal

Republicans are hot and heavy for repeal and this may be a political winner but it will have no impact on actual policy. Any repeal will not make it to the president's desk and if it did the president would surely veto such a measure. I think Republicans would be much better off spending their time and energy on making the health care reform bill better. If I were Speaker Boenher and Minority Leader McConnell my priorities would be the following:
1. Change the minimum benefit plan to allow for Real Insurance- presently the minimum benefit plan is quite generous and thus will be quite expensive. This will put many uninsured that are of modest means in a bind. Make the minimum qualified plan a naked HDHP with some low level of coinsurance after the deductible. First dollar coverage increases utilization and by extension causes medical price inflation.
2. Tax All Health Insurance Equally and Limit the Tax Subsidy- the Health Care Reform bill aims to do this beginning in 2018 on high cost plans ($27,500). This measure is too far out and too modest. Ideally the employer exclusion should be removed entirely and health insurance provided by an employer should be taxed as income. Alternatively, the value of the exclusion could be capped at the median health plan cost and not indexed while enabling those who buy healthcare on the individual market to purchase insurance with pre-tax dollars.
3. Get Employers Out of the Health Insurance Business- by taxing health insurance there will be less of an incentive for employers to provide insurance, but once they dump their coverage, where do their employees go? Presently the state based insurance exchanges will not be available to employees of large firms or firms that offer health coverage. Make the exchanges available to everyone. Now!
4. Get rid of CLASS- it is an unfunded entitlement that was used to game the CBO scoring process.
5. Pass the Brown-Wyden Waiver rule into law- Senators Scott Brown and Ron Wyden proposed that states could opt out of health care reform and use their medicaid dollars so long as they provided similarly comprehensive care. I think if a HDHP plan becomes qualifying care then this would be a sensible option.

Tuesday, January 18, 2011

An Impassioned Defense of Libraries

My analysis of Pied's defense of libraries elicited a very inciteful comment from a reader, Carla (I have readers, who knew?), who as a librarian provides a very thoughtful defense of libraries and in her view their continued relevance. Here is an excerpt from her comment:
"Libraries have community spaces for business meetings, potlucks and book clubs. A children's storytime hour can captivate a child's imagination and get them hooked on books for a lifetime. Libraries are places where artists can exhibit their work. They provide instruction on how to use a mouse, getting started with email, understanding the web, ESL, photoshop and other software, how to write a resume and look for a job, homework help and tutoring for kids and adults in English, math, GED, citizenship test prep, tax prep... I could go on and on. Libraries level the playing field for their users. The rich and poor alike have the exact same access to information and services. Where else does an organization or institution offer equal access to everything?"
One of the interesting things here is that Carla, correct me if I am wrong, seems to be putting a great deal of emphasis on the libraries function as a community center but also as having a role in fostering social equality. The other thing that is interesting to me is the extent to which Carla portrays the public library as this entrepenurial organization that has keyed its efforts in large part on assisting the underserved. These are two points that I really hadn't considered. Anyhow, please do read her comment in full.

Friday, January 14, 2011

Libraries Revisited

I was reading this post by Matthew Yglesias, where he makes the case that libraries are something of an anachronism, which reminded me of a post in defense of the modern library by PeP's very own founding blogger- Piedpiper. Pied's defense of libraries was written not quite five years ago. I would be interested to see if he believes if his defense of libraries has weathered this brief test of time. Pied laid out three arguments in favor of the library in modern times:

Well Pied's first argument in favor of the library is confusing so I will cite the whole bit (notice something here? Yes my readers, a hyperlink, that is like a citation that is even better than a citation. You click on it and it takes you to the source):
"First, the Web is great at providing information. But that information is neither here nor there without the ability to cite your source (!), prove its authenticity, or delve deeper into the subject. The problem with the Web is that since there is so much information, we can't delineate (in many circumstances) fact from fiction."
I think there seem to be two related thoughts here: 1a. appears to be the difficulty of citations (which in the middle aughts actually was a greater concern as citing conventions for online sources where less common than they are today and certainly less accepted). 1b seems to be a concern with the ability to discern whether the source is an authority or not. Apparently Pied gained much more faith in a source if it was on the printed page than pixels on a screen. I guess I don't understand how this is really an issue and I don't think I would have thought it was at the time either. I would say his first concern, that of citations has cured itself. His second concern, that of authenticity was misplaced.

Pied's second argument in favor of libraries centered around the concern with the cost of connectivity. The argument goes that the web is a poor substitute for a library because you need connectivity and a computer a router and so on in order to use the web. Pied argued that one of the areas where a library demonstrated its relevance was by providing the poor with access to the web. I think this still holds up, though, I would guess that at this point the barriers to web access as far as cost goes has substantially diminished in the last five years thus attenuating the libararies usefulness in this function.

Pied's third argument is I believe the most potent, which is that the Library functions as a community center. I guess, here too I wonder how valid this is? A library may be a place where people can have meetings but typically there are in fact things called community centers for that. Libraries typically are characterized by stern old ladies shushing you which really inhibits that whole interaction bit that is the predicate to functioning as a community center. Then again, I don't read books, I burn books, so maybe I am not a good arbiter of this discussion. Pied, what says you?

I think the basic function of a library, sharing books, is still a good one, even as e-readers proliferate but not as necessary as it once was. To me that augurs for the scaling back of public libraries but not outright elimination of them.