Megan McArdle is Always Wrong…Health Insurance Reform/Great Depression edition

I’m trying (and failing – ed.) to learn how to go all Daniel Goldin on my blogging stylz these days (you know, “faster, better, cheaper” and all that), so let’s see if I can keep this latest bit of outrage at Megan McArdle’s willed incompetence short and to the point.

In this post she considers a broad claim…

I’ve been pretty skeptical of the Amity Shlaes argument that regulatory uncertainty was the major culprit in prolonging the Great Depression…

And then rejects her doubts…

Over time, however, in talking to banks and business people, I’ve become more convinced that it’s at least a minor problem…

In support of a conclusion that should make you go hmmm.

About that, more in a moment.  To slice and dice — of McArdle’s first statement,  she shoulda stood in bed.

The historical record is pretty clear (a) that Shlaes is a dishonest and incorrigible hack and the (b) the signal policy that slowed recovery from the great depression in this country (leave aside the global nature of the beast), was the decision to switch from stimulus measures to premature attempts to balance the budget in 1937.  (Something you can see graphically here, with a nice additional slam at Schlaes.)

On her second claim: this is the kind of reporting that has given Ms. McArdle so much of her notoriety to this point…in that, of course, whatever this post represents, it ain’t journalism.

There are certainly actual attempts to study regulation, and that subset of the field, the issue  of uncertainty in regulatory regimes.  If you’re interested in the subject, it takes very little time to find dozens of interesting threads to pull — I’ve just been reading this one on the paradox of prudential regulation [pdf] (i.e., because the cost of regulation is obvious and individual perceived but the benefits from successful regulatory systems are broadly dispersed and individual, it becomes hard to sustain support for such systems).*

But that’s not what McArdle has done here.  There isn’t even a shred of an attempt to suggest that she actually has mustered some real data here.  Instead, she’s talked to some folks she knows and they have told her they don’t like regulation.  They especially don’t like it if they sense that they might not be effectively in charge of the regulatory agencies that purport to govern their industries — which is how I translate “uncertainty” in this instance.

So, to this point, here’s the state of play:

McArdle invokes an often debunked partisan writer to suggest that one of her routinely disproved claims might actually be true. She says this seems to be so because we should trust her when she tells us that her unidentified sources in an industry that has just disastrously failed have told her so.

But never mind, because all this is preliminary to this stirring confirmation that regulatory uncertainty right now is causing businesses to shutter.   Her evidence?  This:

And this seems like a pretty clear cut case of death by regulation:  startup health insurer forced to shut down because of uncertainty surrounding health care reform.  According to the insurer, at least, they neither have the capital to handle the new requirements, nor have any prospect of raising it from the markets, where they’ve already tried and failed to get more investment.

She’s not even trying.

It’s almost not worth the effort to sneer at this.  McArdle’s link is to an article in a local Virginia business journal that, as McArdle indicates quotes the insurer to account for why that insurer is leaving business.  This isn’t journalism, this is stenography.

The whole story boils down to a complaint that an unspecified insurance model established two years ago (hence, in the last administration) may not in the future meet requirements specified by the new health insurance law, and that this is the reason this small insurer has been unable to raise capital.

There are two things to note here, beyond the simple sloth and meaninglessness of taking a failed businessman’s account of why the enterprise went bottom up at  face value.

One is that McArdle is playing a very slippery game here.  Remember:  she began by specifically calling out regulatory uncertainty, all the bad stuff that happens when a new administration starts changing things.  But this company is complaining not simply about lack of knowledge, but of the substance of the change itself:

“…the uncertainties in the regulatory climate coupled with new demands imposed by national healthcare reforms have made it challenging to sustain the level of sales required to remain viable over the long run.” (from James Slabaugh , executive vice president of nHealth.)

New demands, eh?  I’ll leave the reader to judge whether it is the fact that the new health care rules include provisions like prohibiting revocations of policies (rescission), or the like, or whether it is unspecified “uncertainty” that weighs more heavily here.

And while McArdle is careful to fudge just a bit — she refers to “new requirements” after all — she is really trying to have it both or maybe three ways.  Regulatory uncertainty is bad; regulation is bad; and the health care reform is bad…and because she knows these truths to be self evident, she needs do no actual reporting or research to prove her case or identify the specific root causes of the one actual business failure she tries to adduce as proof for these articles of faith.

This isn’t even a parody of journalism.  As I said above:  she’s not even trying with this stuff.

And one last thing, my second point:  it remains amazing to me how gutless and pathetic the glibertarian crowd becomes in the face of actual capitalism.

This insurance company had an approach (unspecified in the linked article) to providing insurance.  It’s approach did not survive a change of administrations, a change in the landscape of health care delivery and payment, the competition within the insurance market itself, and/or the problems that are face  undercapitalized companies at any moment — and especially in a period of disruption in the financial markets.

The company and its owners/managers made bets on certain expectations about the future.  Those bets didn’t pay off.  They go out of business.  I’ve run my own small business and I don’t wish that outcome on anyone…but it is a fact of life in the marketplace: some folks don’t grab the gold ring.

Sorry.

Try again.

I’m a screaming liberal, social-safety-net, environmentalist, birkenstock-wearing**, Berkeley, California born and raised, Kremlin-on-the-Charles educated, Massachusetts-pointy-headed-university type, yellow-dog Democrat, and I got no problem with that.  What’s McArdle’s excuse?

Wimp.

* It’s relevant here because it suggests just how McArdle’s sources may have in fact connived in the regulatory relaxation that permitted the reckless behaviors that lay behind the recent near-collapse of the financial system.

**Actually, I’ve never owned or even tried on a pair of Birkenstocks.  They look ugly and uncomfortable to me … but you got to ride with the stereotype that brung ya.

Image:  Wilhelm Maria Hubertus Leibl, “The Newspaper Reader,” 1881.

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13 Comments on “Megan McArdle is Always Wrong…Health Insurance Reform/Great Depression edition”

  1. nadezhda Says:

    What totally cracked me up was her accepting on its face the notion that a small startup could invent a business model that would be viable in the health insurance field — either pre or post-Obamacare. The barriers to entry in that field are staggering. These guys (assuming they’re sort of for real) don’t need capital. They need a sugar daddy with very deep pockets who’s already a major player in the business or in a closely related field like hospital management or IT. And even then…

    In any event, it’s not like there hasn’t been for the past 3-4 years a high probability that the Dems would win the White House and do their damndest to pass a comprehensive health care reform program that would change the ground rules for insurers. So these guys just discovered that some new rules might affect their start-up?

    Before McMegan even started to draw her sketchy conclusions, the premise of her “telling anecdote” was ridiculous.

  2. Jim Bales Says:

    Tom writes: “I’m trying (and failing – ed.) to learn how to go all Daniel Goldin …”

    Upon reading this line, my immediate thought was:

    “You’re trying to learn how to get John Silber to bulldoze the BU trustees to offer you the Presidency of their University only to have them vote you out a week before you take office so you settle for walking away with a $1.8M golden parachute?”

    “Sounds sweet to me!”

    PS I’ve nothing to add about Ms McArdle.

    PPS It is amazing how little faith libertarians have in capitalism at times!

    PPS Birkenstocks may be ugly, but I find them quite comfortable. Of course, as a physicist, they are required uniform for me.

    • Tom Says:

      Heh. I should be so lucky (slick).

      Re Birkenstocks. I always thought it was the math that kept me from being a physicist. Now I learn the real reason. ;)

  3. Jim Bales Says:

    OK, I lied.

    I do have something to add about Ms McArdle.

    James Kwak’s discusses this report (.pdf) by the staff of the Federal reserve Bank of NY. (ht Atrios)

    Kwak writes:
    [O]n some issues people who study undergraduate economics are more doctrinaire free marketers than professional economists. Table 5 compares the undergraduates responses to those of a survey of people with a Ph.D. in economics. The Ph.D. economists were more likely than economics majors to hold the textbook position on tariffs or the minimum wage. However, they were also more likely than economics majors (or, frankly, any majors) to think that income inequality should be reduced and that government spending should not be reduced, and they were somewhat less worried about federal budget deficits.

    Or:
    “[B]asic economics, the way it is taught today, tends to give people reflexive pro-free market, anti-government positions — positions that are not held by people with a deeper exposure to economic thinking.

    Ms McArdle is a living, breathing, blog-posting example of “reflexive pro-free market, anti-government positions.” One wonders if, upon encountering the slightest notion that counters her prejudices, she spontaneously emits a blog post.

    This hypothesis does, at least, give an explanation as to why, as Tom notes, “she’s not even trying with this stuff.” Her writings may be the product of reflex, not volition

    Best,
    Jim

  4. Batocchio Says:

    Interesting Kwak link there!

    With McArdle, the first danger sign was her starting with Shlaes. After that, it seems likes her usual combo: 1) glibertarian dogma 2) no research, 3) snide conclusion. It goes far beyond confirmation bias with McArdle, since #1 and #3 seem functionally identical. As with Bush, I don’t think there’s any genuine interest in discovering whether things are actually true or not. I find glibertarians like McArdle, movement conservatives and Beltway journalists all more comprehensible in terms of anthropology than empricism. For them, “the truth” is socially determined. That might not be so horrible as a starting point, but they have no interest in exploration, reflection, data…

  5. Ted K Says:

    Some blogs will filter the word idiot. Ok here goes: What is there you can possibly say about Megan McArdle, other than “Megan McArdle is an idiot”…. ?? McArdle shovels so much crap on a daily basis, the only way to keep up with it is run 1+ blogs fully dedicated to refuting it. I propose out of respect to female journalists everywhere, we no longer refer to McArdle as “she”. McArdle should only be referred to as McArdle.

    Or when running into factually unsound statements, or illogically processed mental conclusions, it should hereafter be referred to as a “McArdle”, as in “Boy, David Brooks sure did pull a ‘McArdle’ in that column, didn’t he??”

    Here is a semi-related story on VA care if anyone is interested. The source is Marketwatch website, part of Wall Street Journal’s digital network. For anyone who doesn’t know, WSJ is not exactly a bastion of liberal propaganda.

    http://www.marketwatch.com/story/its-hard-to-top-veterans-health-care-2010-06-02


  6. It’s good news that a few health insurance companies are going belly up. Many have been predatory for a long time. What McArdle is mourning sounds like a good start to me.

  7. atacrew.com Says:

    Health insurance is one of the debates raging about the moment he is all over the country freely.


  8. [...] McArdle, the Atlantic Monthly blogger fond of making up nonsensical arguments about the economy, health care, and education policy, has waded into climate policy with similarly catastrophic results. In a [...]


  9. [...] readers would (and did in McArdle’s comment thread) smell the obvious rat.  McArdle has long since demonstrated that she will say anything, no matter how risible, to defend her required position that [...]


  10. I’m not sure where you’re getting your info, but
    good topic. I needs to spend some time learning more or understanding more.

    Thanks for excellent info I was looking for this information
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