December 31, 2013

Krugman: Somehow, UPS-Fedex Christmas Snafus Make HealthCare.gov Seem Not So Bad

Filed under: Business Moves,Economy,Health Care,Taxes & Government — Tom @ 8:03 am

In a December 27 blog post, New York Times columnist and incurable Keynesian economist Paul Krugman capitalized on the problems United Parcel Service and to a lesser extent Fedex had in delivering Christmas packages on time: “Can’t the private sector do anything right?”

While I recognize that there’s sarcasm in his question, Krugman then went on to try to make HealthCare.gov’s problems appear analogous: “[M]any pundits were quick to declare healthcare.gov’s problems evidence of the fundamental, irretrievable incompetence of government, and as an omen of Obamacare’s inevitable collapse. … (But) none of these people are making similar claims about UPS or Amazon.” Since the Nobel Economics laureate appears to be too dense to understand the differences between the two situations, Robert P. Murphy, “the author of The Politically Incorrect Guide to Capitalism,” explained many of them in a Sunday post at the Ludwig von Mises Institute of Canada’s web site (bolds are mine throughout this post):

Is UPS Just as Bad as Healthcare.gov?

KrugmanWide

… Since Krugman asked so nicely, I’ll explain to him why the UPS/Amazon debacle is not remotely analogous to Healthcare.gov:

(1) People were able to log in and place their orders with Amazon. The complaint is that some of the packages showed up later than promised. In contrast, people couldn’t even sign in to Healthcare.gov. So let’s wait to see if, say, a promised MRI is only a day or two late; that would be the analog to what happened with UPS/Amazon.

(2) I imagine there are some more egregious individual cases, but judging from the news stories it appears that some packages were promised (or “guaranteed”) delivery before Christmas, and yet they didn’t show up until a day or two after. Yes, that is annoying, but it’s not in the same ZIP code as healthcare.gov taking literally months before Krugman felt comfortable enough coming back to defend it. (And to repeat the first point–nobody had trouble placing orders on Amazon. So comparing the delay in final completion with UPS, versus the delay in just being able to sign up with ObamaCare, is already being generous.)

(3) According to the Washington Post, Amazon and UPS are offering refunds and $20 gift cards to customers whose packages were not delivered in time. That’s what happens when private-sector companies screw up; they try to make things right with their customers because they have to. In contrast, even though I got a letter from my insurance company saying I was going to lose my plan, I don’t think the Obama Administration is sending me any compensation for Obama’s repeated lies that this would not happen.

(4) Krugman wonders why people draw the lesson that the U.S. federal government isn’t good at running at business from the failure of healthcare.gov, when we have this evidence of how UPS performed. Well OK, if we want a closer apples-to-apples comparison, we can compare the US Postal Service with private shippers such as UPS and FedEx. Would even Krugman be so silly as to argue that the former was just as efficient as the latter? That would blow up in his face like the time he thought Canadians would publicly endorse their healthcare system. (A note for purists: The US Postal Service has generally not relied on taxpayer funds since the 1980s, though it is an official arm of the federal government and it enjoys a monopoly on first-class letter delivery.)

(5) Finally, the most important difference between ObamaCare and UPS/Amazon: If I don’t want to patronize the latter, nobody is forcing me to. Indeed, I personally don’t use online retailers for Christmas shopping, for precisely this reason; I procrastinate to the last day or two, at which point I have no choice but to buy gifts in person. After burning some of their customers this year, UPS/Amazon may lose business next year. Either way, you can be sure they will hire extra staff and be much more careful about offering their “guarantee” next season. This isn’t because UPS or Amazon employees are inherently nice people, but because they face the market test and have to constantly earn their customer loyalty.

In contrast, I’m losing my particular (catastrophic) health insurance plan because the US government has rendered it illegal, and there are millions of young, healthy Americans who are going to be forced to buy health insurance that they don’t want.

I’ll add just a couple of my own.

UPS and Fedex haven’t told thousands of customers with whom they’ve done business in the past three months that they have to re-enter all of their detailed information. But Iowa’s Obamacare exchange did.

The description of the problem has to make one wonder if it is occurring in other states and not being corrected:

16,000 Iowans are told to apply again
Hang-up in computer records transfer threatens coverage for possible Medicaid recipients

The Friday afternoon announcement stems from a kink in healthcare.gov, which is a key part of President Obama’s Affordable Care Act.

The issue affects Iowans who entered their information into healthcare.gov and received a notice that they might qualify for Medicaid, the public health insurance program for the poor. The federal computer system was supposed to transfer their applications to a state computer system, but the transfer has been complicated by technical problems. The timing is critical, because the new insurance coverage is supposed to take effect on New Year’s Day, which is Wednesday.

State officials say they can’t guarantee that people in this situation will have coverage if they need to see a doctor before the mess is untangled.

How many other federal transfers to state computer systems are being botched?

More obviously, UPS and Fedex don’t charge customers different amounts based on their incomes. Obamacare does. Some get it for free. To cite just one sample zip code, others who have incomes greater than four times the federal poverty level must pay huge amounts for the same coverage in after-tax dollars.

A visit to the Kaiser Family Foundation’s Obamacare subsidy calculator tells us that a single 64 year-old in Cincinnati whose annual income is $46,000 will pay $6,718 per year for a “silver” plan — 14.6 percent of their gross income, and obviously a much higher percentage of their take-home pay after federal, state and local income taxes. For a childless married couple (both 64) making as little as $62,100, the annual premium is $13,437, or 21.6 percent of their income. If such a couple has two children and earns $94,300, the annual premium is $16,281 (17.3 percent of household income).

In each case, if those just described earned just slightly less, thousands of dollars in subsidies would kick in.

Paul Krugman’s attempt to pounce on the problems at UPS and Fedex shows how totally out of legitimate arguments he is.

Cross-posted at NewsBusters.org.

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2 Comments

  1. Everyone seems to want to point a finger at one of the three participants in the Christmas delivery glitch, but I think all three have a piece of it. Customers took the guarantees uncritically. Vendors stuck their necks out with misplaced faith in delivery services. Delivery services tried to estimate the need for extra employees to cover the demand, without wastefully overstaffing. This ability to estimate takes years to refine (much like actuary in the insurance industry, hmm) and is confounded by things like weather.

    To simplify the problems with ☭bamacare to the abject failure of a website that could’ve been written by third graders is disingenuous at best. That’s merely the public face of the debacle. Things don’t connect. Data are lost or misdirected. There is no structural security. Some important parts have not even begun to be implemented. In short, when you get past the front end failure, it just gets worse.

    Comment by Mr Evilwrench — December 31, 2013 @ 10:35 am

  2. Mr. EW, points well-taken.

    Maybe UPS and Fedex should have considered price hikes for the last couple of days before Christmas to try to steer more traffic towards ground and to force people to plan a little better.

    The guess here is that federal regs would stop my idea from ever seeing the light of day.

    Comment by Tom — December 31, 2013 @ 12:18 pm

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