Friday, August 12, 2011

When Smart People Go Stupid

I don't often agree with Ezra Klein but usually I think he's fairly good on his facts if not his interpretation.  But this is far away from his best work

Passage of the Affordable Care Act last year brought us closer in line with our international peers. But not much closer. And consider the costs we continue to impose on ourselves in the interim: If the United States simply had the per-person health-care costs of Switzerland, which has the second-most expensive health-care system in the world, we would spend $3,000 less per person and save about $900 billion a year. Assuming we need to reduce deficits by about $4 trillion over the next 10 years, those savings would do the heavy lifting with about $5 trillion to spare.
Now, let's back up here and think about this.

It seems reasonable to assume that the reducing deficits by $4 trillion refers to the Federal government.  And his math, at the most aggregated level is fine.  Swiss health care spending is $3000 or so per capita lower than US spending and $3000 times 300 million is in fact $900 billion.  So what could be wrong?

Well, first off the spending number is total spending, not government spending, much less Federal government spending.  Federal spending on health care is about $800 billion gross and $620 billion net, the difference between the two being Medicare premiums and copays which are counted as a budget offset.

So is Ezra really saying that the government can save almost 50 percent more than its annual spending?  Maybe he's confused and thinks the Federal government does all of the health care spending in the country.

As I said, sometimes smart people go stupid.

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