Struggling to keep its economy growing, the city of Ruzhou spent big, but is now asking its health care workers for cash to stay afloat.
Great piece. The problem isn’t incompetent officials: the problem is unrealistically high GDP growth targets that clearly cannot be met except by borrowing and overbuilding (and, of course, capitalizing investment losses that should be expensed).https://t.co/cWAJ8ANqsG
— Michael Pettis (@michaelxpettis) November 11, 2019
Begging Nurses for Money
The New York Times asks How Bad Is China’s Debt?
Ruzhou, a city of one million people in central China, urgently needed a new hospital, their bosses said. To pay for it, the administrators were asking health care workers for loans. If employees didn’t have the money, they were pointed to banks where they could borrow it and then turn it over to the hospital.
Ruzhou is a city with a borrowing problem — and an emblem of the trillions of dollars in debt threatening the Chinese economy.
Local governments borrowed for years to create jobs and keep factories humming. Now China’s economy is slowing to its weakest pace in nearly three decades, but Beijing has kept the lending spigots tight to quell its debt problems. Increasingly these deals are going sour, as they did in Ruzhou, and the loans are going unpaid. Lenders have accused three of Ruzhou’s hospitals and three investment funds tied to the city of not paying back their debts.
Local officials have long used big spending to keep the economy growing. Ruzhou is home to a number of white-elephant projects, including a stadium and sports complex turned e-commerce center, now largely unused. A shantytown redevelopment project, begun four years ago to give rural residents new homes, has been slowed for lack of money, locals said.
Doctors and nurses at the traditional Chinese medicine hospital complained to one local state-owned newspaper that they were being ordered to give between $14,000 and $28,000. At Ruzhou Maternal and Child Health Hospital, nurses and doctors were told they had to invest between $8,500 and $14,000, according to government online forums and state media.
Ruzhou officials did not respond to repeated requests for comment. Two employees of The New York Times who traveled to the city were briefly held by the police and forced to leave.
Tip of the Iceberg
Ruzhou has several hospitals in trouble, an unused sports stadium, a cultural complex in shambles, and a failed shantytown project.
Play this same scene throughout China.
It’s everywhere.
Nobody is quite sure how big the problem might be. Beijing says the total is about $2.5 trillion. Vincent Zhu, an analyst at Rhodium Group, a research firm, puts the figure at more than $8 trillion.
Factor in the world’s worst air pollution and water supplies you would have to be crazy to drink from.
Yet, US hyperinflationists think the dollar will collapse to nothing, Chinese debt somehow doesn’t matter, China will soon rule the world, and the yuan will displace the dollar as the world’s reserve currency.
I suggest Forget the Yuan: King Dollar is Here to Stay for quite some time.
The yuan is not even close to competing with the dollar for at least six reasons.
Meanwhile, Chinese growth is hugely overstated and its massive debt problem little understood.
Mike “Mish” Shedlock
All the Orange Dimwit had to do was to tariff/starve the Chinese government into submission. We’ve known for years the Chinese govt. were trying to get capitalism’s benefits while keeping freedom to a minimum — it wasnt gonna work. All Trump had to do was begin the trade war and we’d win. But no, he had to go off on these tangents declaring war on immigrants, other smelly foreign people, and just irritate the heck out of everyone while doing nothing. What I can’t understand is why no democratic presidential candidate is running as a “I would continue Trump trade but I detest everything else he says or does.” That person would have gotten my 2016 Trump vote.
The baby is gonna get thrown out with the bathwater in 2020.
“In the pre-Fed world, recessions were more common, and depressions were much”
Recession is a made-up name.
Prior to the Great Depression, there was no such word!
There were no recessions, the word did not exist. Since then there have been no “depressions”. There have only been “recessions”.
Guess what?
Recession = Depression
Panic is the word that wss used prior to the great depression.
I didn’t know this until now. A recession was referred to as the panic of whatever year.
I knew that the word was “panic” because (name dropping alert) I spent 45 minutes in the green room in the NYSE with Alan Greenspan in 2007 as he was preparing to talk at an event I was hosting. He gave us a history of the early 20th Century markets. We peppered him with questions about a myriad of subjects – he is a walking history book on the capital markets. My NY risk management friends are not big fans, but he packed out the room for us.
Its Obamas fault! rolls eyes* Google may be secretly gathering millions of personal health records with alleged ‘Project Nightingale’ link to theverge.com
I posted recently on how the China GDP is a lie. This is just more evidence of that. China is only where they are because of the US consumer and deal with the devil that the US government/politicians and corporations made to move manufacturing to China. China’s books are opaque and clear as mud. This is a net positive for other manufacturing economies in Asia as well the developed first world. There was also a flood of wealth that left China after they limited the amount of money in Chinese banks. Most of the real estate buyers on the west coast of North America are wealthy Chinese immigrants and investors.
Great post. I agree with you.
I think an argument can be made that Japan in the 1970s and S. Korea in the 1980s followed a similar model to the current Chinese one.
The Chaebolsb were the bête noire from Korea, and MITI was going to out think all the short-termists in the U.S. with long term planning and coordination of the Japanese economy, BUY PEBBLE BEACH!!!!! and win the second World War. They wre scary times until you realized it was just more pundits with too many voracious viewers and too little material to sate them.
Note: I agree that China GDP is a lie – it is whatever number they want it to be … or need it to be.
The brings to mind a story from my family history. Back in the 1880s my great-grandfather ran a grocery store. He was asked to be a co-signer on a loan to fund a new hospital, which he did. When the depression of 1892 came, he had to liquidate his store and give everything to the hospital to help service the debt, and then spent the rest of the depression painting the black on pots in Denver to keep his family fed. (Oh, and yes, there were plenty of very deep depressions back in the days before the Fed).
The point of this story is that it’s not unheard of to ask sources other than the government to finance hospitals. In fact, it’s a very modern thing to expect government to build them on it’s own.
No argument, but it’s also apparently a very Ruzhou thing to “ask” (i.e. order) their doctors and nurses to directly finance the hospitals, even if it means taking out personal loans to do so!
When in history has a centrally planned command and control economy ever been successful? Has govt ever allocated capital better than the free market? Add the enormous costs of maintaining a police state to control its citizens, it doesn’t bode well for the “Chinese economic miracle”. Instead of a trade war to contain their malevolent predation on the rest of the world we should try starving them foreign currency instead of giving them the cash to dominate the west and terrorize their citizens.
I’ve never figured out the logic how you can fix a debt problem with more debt.
Don’t be a Krugmanite. Aggregates are irrelevant. Nothing, debt included, is “ours”. And there never have, never will, exist any “we.”
The fix is very simple: Then “problem” is that someone connected has too much debt. So the fix is to transfer the debt to those not as connected. By way of either a direct taxpayer bailout, or by the means Keynes, back while he was still an economist instead of just a partisan clown, recognized that not one man in a million would catch on to: Debasement mediated wealth transfers. Nothing new under the sun, and no different in China from here.
Another solution. Don’t go into debt. Period. always live within your means. This included the government.
You can only “fix” (temporarily) a debt problem with more debt if the NEW debt has a lower interest rate. Hence, the current need for negative interest rates. They are now a requirement, to keep the fiat debt-money system functioning.
Pettis and I have met. I invited him to speak at a fundraiser Hussman and I put on, and he few in from China to present. We occasionally share emails. We follow each other on Twitter.
Ah yes – you linked to one of his twitter posts in the article – not my most observant moment, obviously.
They may have to resort to even more organ transplant tourist business to keep the scheme going.
Mish: I assume you have heard of Michael Pettis and maybe read his book “The Great Rebalancing: Trade, Conflict, and the Perilous Road Ahead for the World Economy”. He covers this situation in detail.
Yes “Free Care” !!!
Instead of that racist Obama shoving his insurance scam down everyone’s throat, here is what should have happened in the first place:
Between Deductible Security and Price Tags and think the latter is imperative.
The problem is that you have doctors who think that being forced to publicly declare their price, like a plumber, is somehow beneath them.
We already have medical procedure codes to group the activity. They know what they charge for them. Any argument otherwise is disingenuous.
Obviously your bigotry and well-trained-by-Fox-News opinion on Obamacare is asinine, but the article is a good example of government getting healthcare right. The Indiana example is similar to the medical plan my company prefers we select, down to the HSA donations. Singapore is a good example of a country where government is respected and people from the government who are there to help aren’t seen as the ultimate problem, as Reagan asserted.
Other countries with much less cost and better outcomes include Canada (Medicare for all), France (run by the government and covers all citizens, and mixes public and private providers), and New Zealand (government single payer).
The real problem is that the healthcare industry, like many industries (MIC, energy), have bought and own our politicians.
For example, Turbotax have repeatedly managed to stop the IRS from pre-filling in our tax forms and sending them to us for any adjustments and our signature, even though, for the majority of people, the IRS has all the information to automatically do our taxes.
Still don’t watch click bait — not fox and not CNN
Think Singapore did it right
Bob, have you been to Singapore? The beer is eye-wateringly expensive, like Norway. When we tried to buy a six-pack and sit on our balcony we realized that the bars weren’t gouging – it was all government taxes.
Singapore gets it right because they are a small nation and the government regularly adjusts policies to actively regulate the supply and prices of healthcare services to keep costs in check.
Singapore have good government. Why can’t we have that? Too many people in this country see government as the problem to all their ills and just whine about it – these are often the same ones who tell us to “keep government hands off my Medicare”. Stop pulling government down and make it work for us instead. Stop voting based on your team affiliation, and start asking your own team’s politicians why they work so hard to allow money into campaigns and how they are building nine-figure wealth on a public salary. This applies to both parties.
Yes Mono, I have been to Singapore many many times. The US government doesn’t work like Singapore, not even close — which is why the US government gets lots of ridicule. The US government is far more corrupt, under both parties.
Your opinion on medicare is irrelevant. Its bankrupt and they are already weaseling out of payments for “the rich”…. Just like income taxes were supposed to only impact “the rich” when they first started, it was a matter of years before the crooks in Washington extended taxes to everyone. The same will happen with medicare defaults, regardless of what voters think or want, because the money isn’t there.
And I would also suggest you watch the youtube video of Lee Kuan (the guy who founded Singapore) in which he discusses the Singapore health payment system.
When it was first set up, a moron socialist suggested a universal system and pointed to China’s “successful” system. Lee made the minister feel so stupid that that minister dropped out of politics and never showed his face in public again. This was decades before the US government failed again and again to come up with a functioning system.
Lee also discussed the Chinese system, and predicted how it would fail over time. The story Mish posted is almost verbatim what Lee said would happen.
Only morons still believe in magic free sh!t. Its shameful that Bernie and Pochohantis have any supporters — they are too stupid to pass kindergarten (NO FREE LUNCH, MORONS)
Country Bob,
I read that article, it doesn’t make sense. In Indiana, their deductible is $2850. So people will price shop until that deductible is paid, then they will stop price shopping. No big savings there.
I think Singapore did it right, and that is what the article is really based on. Indiana and Wholefoods (whatever their plans may be) get warped by Obamacare and the US medical education complex, so they are bad examples.
Read the Singapore plan. People pay cash except for truly catastrophic injuries (changing your gender is not an injury and they don’t cover it). Hospitals are required to post prices or they don’t get paid.
Here in the USA, elective surgery like Lasik and Boob jobs have had price DROPS. They aren’t covered by insurance fraud, and doctors compete on both quality and price.
Country Bob – I reread the article. If someone was going to get a $300,000 surgery, there is no incentive for patients to price shop, and no incentive for providers to make prices competitive. So, I still think the Singapore plan only works until people meet their deductible. If I am missing something, please explain.
I linked the CNBC article because everyone can get to it, and its short so it doesn’t scare people with short attention spans. Like most stuff on CNBC, its kind of a puff piece.
Singapore lets people pay with something similar to an HSA in the US (its tax advantaged). After that, they pay cash. There is no “deductible”, that is a US insurance concept.
I have no idea why you are studying a $300K surgery. That is not the norm anywhere in the world. The majority of health spending is nothing that complicated. For truly catastrophic surgery, Singapore has catastrophic insurance coverage — but it covers real catastrophes, not common health treatments. Insurance is about covering risks, not covering common and expected expenses.
Let’s talk about reality instead of ridiculous surgeries that are the exception not the rule. Normal treatments cost less pretty much everywhere in the world outside the USA — at least 50% less than the USA and many times less than that.
Singapore health is paid “in cash”. First out of their HSA (its not called an HSA, but trying to put it in terms US citizens understand). Its a tax advantaged account to cover normal health expenses.
If you use up your “HSA” in Singapore, than you pay cash to cover the rest of common health spending. Bluntly, if you use up this amount every year, you are in really poor health and you have a lot of nerve expecting your neighbors to foot your bills. Most of the time, there is “left over” in the account at the end of the year.
That amount gets rolled over into Singapore’s retirement account (its different, but in US terms its something akin to a 401K or IRA). This is above and beyond what you contribute to retirement otherwise. The less you waste on health care, the better your retirement will be.
Please also keep in mind that most of the world isn’t comprised of couch potatoes like the USA.
The biggest determinants of health outcomes (according to several US and international studies) are genetics, food choices / nutrition, and lifestyle (getting exercise and fresh air). Access to health care is 4th (and less than 10% of the total).
Genetics are a wash (US is better in some categories, worse in others, but mostly humans are humans). Better food and better lifestyles explain why the rest of the world has better health outcomes than the USA.
If one is a fat slob sitting on the couch all day eating fried fast food and never exercising — there is no hospital that can fix that. This is the reason the USA has bad health outcomes at all health price levels.
Please stop re-reading the CNBC article. It was merely the easiest thing to link and its short. Read up on the details of Singapore’s system (use your favorite search engine). Singapore’s system is vastly better than the US (it really is 70%+ cheaper)… but keep in mind health care is 4th on the list of determinants of outcomes.
Also, please keep in mind that most doctors in the USA will offer cash discounts for their services. Definitely not all, but well over half will treat you for a lot less.
Doctors have payroll (nurses, bookkeepers, etc), rent / mortgage on their office space, lease payments on the equipment, and they have to buy standard stuff (band aids, gauze, splints, etc etc). Those staff / vendors and landlords expect to be paid NOW (within 30 days like every other business).
Health insurance does not pay on time — typical delay is 6-8 months, and Medicare is more than a year. The doctor has to pay his suppliers NOW, and then finance the costs until the insurance pays.
Lets not talk about the byzantine system of medical coding that makes all insurance a nightmare for everyone.
So if the doctor can get cash NOW, he/she will jump at the chance. But you have to ask.
Your employer may offer an HSA plan, or you can just get your own (employers sometimes match your contribution, which makes the employer option better if offered). You can use the HSA to pay “cash” if you negotiate with your doctor.
Remember, before the wage controls put in place during WW2 — paying cash to doctors was the standard. Health insurance was first offered as a way for companies to get around wartime wage controls. And it turned into a nightmare
The Singapore analogy is interesting insofar that it has two major features: (1) catastrophic healthcare is the purview of the government. Cancer, heart attack — fully paid for by the government of singapore (2) individual mandated savings; nearly 40% of income is saved — by law and can be used for buying a first home or covering healthcare costs. Finally, the non-catastrophic healthcare can also be very expensive (they have an excellent healthcare system)
If you consider that the average American saves less than 5% of his salary — and BTW the savings are administered by a government agency (just so that you know how it works).
It is a system that works, that has extensive “public health” that makes a big deal about obesity and bad food.
P.S. I lived in Singapore for many years
If you really lived in Singapore for years (its the internet, you might be anyone)… anyway, if you actually lived there then you know Singapore’s government under the Lee family has been far more competent and far more ethical than any of the bullsh!t in any G7 country.
Just because the Lee family is effective in Singapore doesn’t mean other governments can or will… and shame on you for making such a bogus suggestion.
The US government spends $40K on a coffee maker (for themselves) and “justifies” wars on false pretenses while the FBI tries to rig domestic elections. And that b!tch Pelosi openly bribed members of Congress on national TV to get obama’s insurance scam passed. Absolutely stupid to suggest the US government could emulate Singapore.
On the other hand, the US can implement Singapore’s health system.
Singapore’s system uses the Lee family (government?) but the US government isn’t the Lee family. And talk about succession risk — its not clear the Lee family can keep up any more than George Washington’s prodigy could (and didn’t).
Choice is essential — so publish prices, enforce cash acceptance, and allow consumers to decide where to put their HSA (a bank account works, even if Wall Street doesn’t like this).
PS — We would all be better off putting retirement money (including Social Security) into low cost mutual funds (again, don’t care what Wall Street thinks of this). Keep it away from the greedy unethical politicians of both parties.
PPS — Singapore has multiple layers of “healthy living” directives, some government encouraged, some peer pressure encouraged. I haven’t heard any of it is mandatory, but I am not sure and the peer pressure ends up being the most effective anyway.
Ultimately, the healthy living (better eating, 8hrs sleep, lower stress, and lots of exercise) is what gives countries outside of the USA better health outcomes, not a corrupt government insurance scam. Even when the Lee family (or some other exception that proves the rule) runs the insurance program, its the better lifestyle that really matters.
If you lived in Singapore (we have no way to verify your claim) — then talk about the food. I’ve visited Singapore many many times and the difference between US fast food and Singapore fast food is stunning. We have “instant Ramen noodle soup” here in the USA (Asians are no doubt making lemon faces at this). But this amounts to garbage noodles in hot water with MSG and food coloring. Singapore noodles are often hand made (various quality, but always higher than dehydrated US crap). And Singapore ramen has lots of veggies, real broth, and often a few bits of meat. Both dishes are called ramen, both are “fast food” (they are put together quick) — but one is a lot healthier than the other. That is one simple and somewhat arbitrary comparison, but it is illustrative of the difference in food.
Too many Americans sit on a sofa, eating fried foods, getting poor sleep and no exercise. No medical system is going to fix that even at double or three times the price.
Your key point here is “elective surgery”. If you have the time to shop around and can compare “products” you can get a good price and high quality. But most medical situations are not elective and are far more urgent than Lasik or boob enhancement, so the comparison breaks down.
ALL medical procedures in Singapore have their prices posted, not just elective surgeries. This creates price competition even in emergency surgery. The public takes note of which hospitals are efficient and which are not, which doctors are efficient and which are not.
Even when the price is “too high”, you know what the price is.
In the USA, you get the procedure done — and they make up a price after the fact. Different prices for different people, even with the same doctor in the same hospital.
Darned near all expensive treatment is non emergency, non acute need. Those who pay for it have plenty of time to shop around. Which is something all of them would do, if they could save an annual income or ten by doing so. And further, which is exactly why the costs some medical procedures, which are no different in any economically relevant way from others, aside from the former being rather arbitrarily dubbed “elective” and the latter not, are massively improving in both quality and affordability, while the latter is moving in the opposite direction.
And besides, aside from orphans having massive motorcycle accidents on their 18th birthday or some such, the time to shop for emergency care is before you need it. Then you have plenty of time. “We” don’t need government to violently insert themselves into the concert ticket business just because some yahoo who insists 10 minutes before they go on stage is the right time to buy Stones tickets, has to pay a bit more than less careless fans.
What drives ever higher health care costs in the US (and West), is not that people are passed out, seconds from dying and can’t make make it to HealthcareCosts.com to comparison shop between care providers for every expensive treatment they may “need” or want. Everyone knows this. You do as well. Like most devoted parroters of progressive tripe, you’re not as dumb and naive as you pretend to be
Actually, introducing price tags and charging everybody the same price is not even an innovation, it is simply applying 100 year old black letter law against racketeering, trusts, and commerce. If your car mechanic tried any of this stuff, he’d be arrested (no estimate, different prices for different “plans”, etc.).
I don’t know if Lee / Singapore were the first to implement the “novel” idea of price tags and charging everyone the same price in health care… as you say, its hardly a new idea in other fields.
But as obvious as it is, the concept eludes the US health system and the racist “reformers” behind Obamacare
I emailed Sean Flynn, the author of the above MarketWatch article with my questions. I am very impressed with his reply, which is:
“You make a very good point and it is one that should make you even more persuaded that this will work. I say that because both Whole Foods and the State of Indiana got 35% reductions in medical spending even though their plans had maximum deductible caps. So, presumably, you would get even larger reductions in spending if you didn’t cap the annual deductible.
Singapore, for instance, has an annual deductible of $2,000 but then there is a 10% copay on all spending above that annual deductible. So people are price sensitive even for the largest, most expensive procedures.
That policy along with price tags (they are mandatory in Singapore for all procedures, both those covered by insurance and those that are elective) has resulted in Singapore having the lowest medical costs in the world. They’re spending about 4.2% of their GDP on healthcare while the UK, Canada, Japan, France, Sweden and other developed countries are all at about 10-12% of GDP–except for the United States, which is spending 18% of GDP. Thus, Singapore is getting what are arguably the best health outcomes in the world while spending about 75% less than we are and 50-60% less than what all the single payer countries are spending. We really need price tags and high deductible insurance!”
I hope hospital personnel decided to quit and look elsewhere to work.
In China, eventually you will work where the CCP tells you to. And they know how to make you like it.
But…. But… But…
FREE UNLIMITED HEALTH CARE?!?!?!
China is the most successful socialist state evah! What do you mean “pay debts”? That’s just crazy talk.
Socialism means unlimited free sh!t for everyone! Unicorns peeing champagne and farting gold bricks! Now you say they have to balance the books like everyone else?
/sarc (the socialists need this sarcasm stuff spelled out)
Stay on topic Bob
It is absolutely on topic.
Socialist healthcare is a disaster, and relies on external subsidies to appear to work even though it does not…. not even in a “successful” socialist country (there is no such thing)
The Chineese need to steal from nurses to create the illusion their system is working.
There he goes…Communist loving Country Bob.