 | The examples and perspective in this article may not represent a worldwide view of the subject.(June 2023) |
Cost disease socialism is a proposed concept by Steven M. Teles, Samuel Hammond, and Daniel Takash of the Niskanen Center, a free-market think tank. It describes an economic pattern in which the subsidy of essential goods and services, coupled with limitations or regulatory constraints on new supply, increases the price without increasing the quantity provided.
"Cost disease socialism" was termed by Steven M. Teles, Samuel Hammond, and Daniel Takash, in their 2021 report published through the Niskanen Center. [1] [2] Despite the similar name, it is not related to Baumol's cost disease, which is an alternative hypothesis for why costs go up in sectors with slower productivity growth. [3] [4] While Baumol's cost disease is focused on services, cost disease socialism can be applied to any essential good or service. [5]
Cost disease socialism contrasts with other theories of why costs become high, such as Baumol's cost disease, luxury goods effects from increasing incomes, rent-seeking, and red tape. Cost disease socialism happens when essential goods or services are subsidized through government or philanthropy, with limitations or regulatory constraints on new supply. [5] The inelasticity of supply coupled with increased demand leads to costs rising more sharply than would be expected if the supply were elastic. [6]
As of 2021, Medicare is 14% of total federal spending in the United States, and nearly 7% of Medicare money is used for dialysis treatments, [7] which are fully covered. [8] In the United States, dialysis typically takes place in clinics, and costs $87,000 per year. [7] In contrast, other countries use home-based dialysis, which is cheaper and preferred by patients. [9] In the United States, the dialysis industry is an oligopoly, with 83% of the market served by two companies, DaVita and Fresenius. [9] Medicare pays treatment providers per treatment, which may disincentivize better outcomes for the patient, such as preparation for kidney transplant. [9] DaVita employees have been recorded by the Last Week Tonight show misleadingly telling patients that transplant is an equivalent option to dialysis, even though transplant results in a two to three times increased life expectancy. [8]
As of 2022, 37.5 million people in the United States have hearing loss but only 20% use a hearing aid. [10] Senator Bernie Sanders added a provision to the Build Back Better Plan to increase government subsidy for hearing aids. [10] The plan did not pass, and Hammond, Takash, and Teles criticized the plan, saying that "socializing costs while restricting supply will produce greater inflation". [1] Later that year, United States president Joe Biden signed an executive order allowing hearing aids for hearing loss diagnosed as less than severe to be sold over the counter without a prescription, which is expected to result in 63 million dollars per year in savings for consumers on hearing device products. [11]
In 2017, the New York Federal Reserve found that when subsidy of student loans was increased, 60% of the increase translated directly into tuition fee hikes, without any change in the secondary education that students were receiving. [12] The Niskanen Center holds that supply of essential goods is often constrained by regulation; [7] critics, such as Noah Smith, cite that overregulation is not a complete explanation of why higher education is so expensive. [6] Aside from the supply, the quality of secondary education needs to improve for it to be worthwhile. At for-profit colleges, students who complete their degrees earn $3,500 to $4,000 more on average per year. Students who started secondary education without necessarily finishing it had on average a negative salary change, perhaps because dropping out of college is a negative signal on a resumé. [13] A study found that increases in the cost of providing secondary education from 2003 to 2013 were largely driven by increases in the numbers of non-teaching student services and administrative staff at schools. [14]
One paper estimates that if housing were not constrained in the cities of New York, San Francisco, and San Jose, the United States GDP would be 4% higher. [15] This is because high rents cost more money without increasing productivity. In the average city, a tech worker moving in creates five other jobs; in San Francisco, local economist Tom Egan estimates that the same professional creates just over two jobs on average because so much of people's income goes towards rent. [16] According to the cost disease socialism theory, government attempts to alleviate the high cost of rent through subsidies and rent controls lead to higher prices in the absence of regulatory attempts to increase the supply of housing. [7] Additionally, some researchers find that rent control can have a net negative effect even for tenants under rent control, taking into account decreased landlord incentive to maintain housing quality, and tenants not being able to move out of poor quality housing due to higher prices in the uncontrolled sector. [17]
The Build Back Better plan proposed in 2021 was called Hammond, Takash, and Teles "an extreme example" of cost disease socialism when it came to child care. The bill included subsidizing 90% of child care costs while increasing them through increasing child care provider salaries and mandating child care provider credentials. [1] The bill could also have potentially reduced supply by disallowing some informal care programs, such as those hosted by religious institutions. [18]
A natural monopoly is a monopoly in an industry in which high infrastructural costs and other barriers to entry relative to the size of the market give the largest supplier in an industry, often the first supplier in a market, an overwhelming advantage over potential competitors. Specifically, an industry is a natural monopoly if the total cost of one firm, producing the total output, is lower than the total cost of two or more firms producing the entire production. In that case, it is very probable that a company (monopoly) or minimal number of companies (oligopoly) will form, providing all or most relevant products and/or services. This frequently occurs in industries where capital costs predominate, creating large economies of scale about the size of the market; examples include public utilities such as water services, electricity, telecommunications, mail, etc. Natural monopolies were recognized as potential sources of market failure as early as the 19th century; John Stuart Mill advocated government regulation to make them serve the public good.
Kidney dialysis is the process of removing excess water, solutes, and toxins from the blood in people whose kidneys can no longer perform these functions naturally. This is referred to as renal replacement therapy. The first successful dialysis was performed in 1943.
A subsidy or government incentive is a type of government expenditure for individuals and households, as well as businesses with the aim of stabilizing the economy. It ensures that individuals and households are viable by having access to essential goods and services while giving businesses the opportunity to stay afloat and/or competitive. Subsidies not only promote long term economic stability but also help governments to respond to economic shocks during a recession or in response to unforeseen shocks, such as the COVID-19 pandemic.
A Pigouvian tax is a tax on any market activity that generates negative externalities. A Pigouvian tax is a method that tries to internalize negative externalities to achieve the Nash equilibrium and optimal Pareto efficiency. The tax is normally set by the government to correct an undesirable or inefficient market outcome and does so by being set equal to the external marginal cost of the negative externalities. In the presence of negative externalities, social cost includes private cost and external cost caused by negative externalities. This means the social cost of a market activity is not covered by the private cost of the activity. In such a case, the market outcome is not efficient and may lead to over-consumption of the product. Often-cited examples of negative externalities are environmental pollution and increased public healthcare costs associated with tobacco and sugary drink consumption.
Subsidized housing is government sponsored economic assistance aimed towards alleviating housing costs and expenses for impoverished people with low to moderate incomes. In the United States, subsidized housing is often called "affordable housing". Forms of subsidies include direct housing subsidies, non-profit housing, public housing, rent supplements/vouchers, and some forms of co-operative and private sector housing. According to some sources, increasing access to housing may contribute to lower poverty rates.
Official website
In economics, the Baumol effect, also known as Baumol's cost disease, first described by William J. Baumol and William G. Bowen in the 1960s, is the tendency for wages in jobs that have experienced little or no increase in labor productivity to rise in response to rising wages in other jobs that did experience high productivity growth. In turn, these sectors of the economy become more expensive over time, because their input costs have increased while productivity has not. Typically, this affects services more than manufactured goods, and in particular health, education, arts and culture.
Affordable housing is housing which is deemed affordable to those with a household income at or below the median as rated by the national government or a local government by a recognized housing affordability index. Most of the literature on affordable housing refers to mortgages and a number of forms that exist along a continuum – from emergency homeless shelters, to transitional housing, to non-market rental, to formal and informal rental, indigenous housing, and ending with affordable home ownership.
Health care prices in the United States of America describe market and non-market factors that determine pricing, along with possible causes as to why prices are higher than in other countries.
In public choice theory, fiscal illusion is a failure to accurately perceive the amount of government expenditure. The theory of fiscal illusion was first developed by the Italian economist Amilcare Puviani in his 1903 book Teoria della illusione finanziaria. Fiscal illusion occurs when government revenues are not completely transparent or are not fully perceived by taxpayers; then the cost of government is seen to be less than it actually is. Since some or all taxpayers benefit from government expenditures from these unobserved or hidden revenues, the public's appetite for government expenditures increases, thus providing politicians incentive to expand the size of government.
The American Kidney Fund (AKF) is a publicly supported non-profit organization founded in 1971.
The United States spends approximately $2.3 trillion on federal and state social programs include cash assistance, health insurance, food assistance, housing subsidies, energy and utilities subsidies, and education and childcare assistance. Similar benefits are sometimes provided by the private sector either through policy mandates or on a voluntary basis. Employer-sponsored health insurance is an example of this.
The healthcare reform debate in the United States has been a political issue focusing upon increasing medical coverage, decreasing costs, insurance reform, and the philosophy of its provision, funding, and government involvement.
Cost-shifting is an economic situation where one individual, group, or government underpays for a service, resulting in another individual, group, or government overpaying for a service. It can occur when one group pays a smaller share of costs than before, resulting in another group paying a larger share of costs than before. Some commentators on health policy in the United States believe the former currently happens in Medicare and Medicaid as they underpay for services resulting in private insurers overpaying. Although the term cost shift is used in the field of healthcare these days and there are many studies about it, other fields have more or less used it. For example, its origins go back to the environmental economy where cost-shifting referred to the practice where corporations pass the harmful consequences and negative externalities of economic production to third parties and communities whether those that are part of the production circuit or are in some way beneficiaries or those that are outside this circle, K.W. Kapp, is one who coined the concept. This concept is also used in the American legal system, especially since the cost of electronic discovery has increased dramatically due to a large amount of raw information and the urgent need to extract relevant data, its processing, and analysis. In the past, each of the plaintiffs and defendants had to bear the cost, but later many of those who prepared the summons demanded the transfer of the cost because they thought they would have to pay for something they did not do. In this regard, some courts have agreed to shift part of the costs to the complainant.
The Affordable Care Act (ACA), formally known as the Patient Protection and Affordable Care Act (PPACA) and colloquially known as Obamacare, is a landmark U.S. federal statute enacted by the 111th United States Congress and signed into law by President Barack Obama on March 23, 2010. Together with the Health Care and Education Reconciliation Act of 2010 amendment, it represents the U.S. healthcare system's most significant regulatory overhaul and expansion of coverage since the enactment of Medicare and Medicaid in 1965.
Health care finance in the United States discusses how Americans obtain and pay for their healthcare, and why U.S. healthcare costs are the highest in the world based on various measures.
Health care efficiency is a comparison of delivery system outputs, such as physician visits, relative value units, or health outcomes, with inputs like cost, time, or material. Efficiency can be reported then as a ratio of outputs to inputs or a comparison to optimal productivity using stochastic frontier analysis or data envelopment analysis. An alternative approach is to look at latency times and delay times between a care order and completion of work, and stated accomplishment in relation to estimated effort.
Millennial socialism is a resurgence of interest in democratic socialism and social democracy among Americans and Britons born between 1981 and 1996, generationally known as millennials.
In United States public policy, supply-side progressivism is a political ideology that emphasizes increasing the supply of essential goods and services, such as housing, healthcare, and higher education, in order to make them more abundant and affordable. Supply-side progressives believe that some regulations artificially restrict the supply and drive up costs of essential goods and services, while other regulations, such as antitrust law, need to be implemented or enforced to encourage market competition and innovation. They also advocate for more investment in research and development for technologies such as sustainable energy sources in order to increase abundance and reduce costs over time.
Concerns of both a current and future shortage of medical doctors due to the supply and demand for physicians in the United States have come from multiple entities including professional bodies such as the American Medical Association (AMA). The subject has been analyzed as well by the American news media in publications such as Forbes, The Nation, and Newsweek. In the 2010s, a study released by the Association of American Medical Colleges (AAMC) titled The Complexities of Physician Supply and Demand: Projections From 2019 to 2034 specifically projected a shortage of between 37,800 and 124,000 individuals within the following two decades, approximately.