Archive for the ‘health care’ Category
The biggest barrier to single-payer in the US, other than politics, is the inefficiency of Medicare. Medicare alone spends more than $2000 per American but only manages to cover 14% of us. Yes, they are a particularly costly 14%- but some governments, like Greece and Portugal, manage to cover 100% of their population by spending similar amounts.
Medicaid spends just under $2000 per American and manages to cover 20% of the population. Together our two big government health programs spend about $4000 per American and cover 34% of the population. Almost every country with universal coverage manages to achieve it while their government spends less than $4000 per person.
This means that Medicare and Medicaid are collectively either 3 times better, or 3 times more inefficient, than the government health programs in other rich countries. Which do you think it is?
The problem isn’t that American taxpayers aren’t willing to finance universal coverage. The problem is that they already pay enough for a competent government to bring about universal coverage, but our government does not seem to qualify.
Just about everyone has heard something of the debate over how immigrants affect the jobs and wages of natives. The general consensus in economics is that immigration has neutral to positive effects on the average native. This can happen because immigrants aren’t just substitutes for the native labor supply- they can also be complements for native labor, and their consumption increases the demand for American goods. Much ink has been spilled over the remaining contentious point of whether any major group of natives is harmed even if most Americans aren’t, with Borjas and some others finding that low skilled Americans see a slight wage decline, and Peri and others arguing they don’t.
One often-cited reason that immigration can benefit natives is that immigrant entrepreneurs start businesses that end up hiring Americans. But this point relies on one crucial assumption- that the immigrant-founded businesses aren’t simply displacing native-founded ones. While there has been a huge body of research on whether immigrants take American jobs and wages or not, there has been drastically less written on whether immigrants “take” American businesses. Perhaps immigrants willing to accept lower profits push out native businesses.
Keshar Ghimire, an economics PhD candidate at Temple University, answers the question in his innovative job market paper. A straightforward way to go about this would be to see whether states with more immigrant-founded businesses have fewer native ones. Keshar does this and finds that states with more immigrant-founded businesses actually have more native ones. But, he argues, this may simply be because some states are better for business and so attract both types of entrepreneurs, rather than immigrant entrepreneurs actually causing natives to start businesses.
To determine the real effect of immigrant businesses on native ones, he needs to find a change in the number of immigrant entrepreneurs in a state that wasn’t just caused by changing business conditions affecting everyone; it should be something that only affected immigrants. He finds such a change following the 1996 welfare reform. The national reform largely removed immigrants from eligibility for welfare. But 15 “generous” states allowed immigrants access to the new State Children’s Health Insurance Program (S-CHIP), which provides insurance for children whose families have relatively low income but who are too wealthy to qualify for Medicaid. Keshar finds that these states got a huge 22% increase in immigrant entrepreneurship. While my own work shows that health insurance isn’t always a barrier to entrepreneurship, one good study found that Medicare leads to a similar increase, so I find this plausible.
So what happened to native entrepreneurs in the 15 states that got this big influx of immigrant entrepreneurs? Keshar finds that they were not scared off. There was no change in the amount of unincorporated businesses owned by natives in these states relative to the others. The number of natives with incorporated businesses actually went up- so much that every two new immigrant businesses lead to one new native business. It turns out that just like workers, businesses can complement each other rather than only compete.
In sum, more immigrant entrepreneurship actually attracts native entrepreneurs rather than scares them away. I hope that this finding will make it in front of states considering S-CHIP eligibility, and in front of the US Congress debating immigration- especially on whether we should create a “founder visa” easing the way in for those who plan to start businesses, as some other countries have.
In a paper just published in Contemporary Economic Policy (ungated here), Anna Chorniy and I find that the answer is no- at least for one piece of the Affordable Care Act. The piece we study is the dependent coverage mandate, which since September 2010 has required family health insurance plans to cover young adults up to their 26th birthday, rather than just their 19th. The ability for young adults to go on their parents health insurance plans gave them a major option for insurance that wasn’t tied to their jobs. I expected this to reduce the “job lock” problem- people staying in a job because switching jobs would mean losing their current employer-based health insurance.
But this effect is just utterly absent from the data. I’ve never seen a result turn out so robustly insignificant in every single way we slice up the data or vary the analysis.
Perhaps the job lock problem is overblown in general, though many papers have found evidence of it; or perhaps 19-25 year olds were simply too young and healthy to really care. Certainly many journal referees thought the result was too obvious to be worth publishing (obvious after reading our paper, at least). Thanks to CEP editor Brad Humphreys for being willing to publish a “negative result”; the fact that so many editors and referees are unwilling to do so is a major source of publication bias and not-so-ethical behavior in response.
Negative results aside, I think we really do have an interesting point to make: that the effect of job lock should differ by age, going from non-existent for young adults to substantial for older adults. This is indeed obvious once we point it out. But it was ignored by a large previous literature on job lock, which has tended to lump all working-age adults together and pronounce what “the” job lock effect is (or to focus on a single age group without pointing out how their age makes them unusual). Always be on the lookout for how people respond differently to the same thing.
In my recent post on a way forward after a ruling for the plaintiffs in King vs Burwell, I suggested Republicans use the opportunity to do a sort of Medicaid privatization along the lines that Arkansas has done. While my post was just obsoleted by the fact that the Supreme Court ruled the other way, I now think that the case for states to do their own reforms is even stronger.
In order to make the ACA Medicaid expansion politically palatable for Republicans, Arkansas did a sort of privatization of Medicaid- using Medicaid funds as “premium assistance” to allow recipients to choose a private plan from the ACA exchanges.
While the Obama administration wasn’t crazy about this idea, they (and some progressives) decided it was better than no Medicaid expansion, and so granted a waiver from the usual Medicaid rules to allow this to proceed.
There are some real potential problems with the Arkansas full privatization approach.
First, Arkansas hopes to save money- or at least not lose it- by privatizing. This is actually a condition of the federal waivers allowing their experiment. This may or may not work out- private plans might operate more efficiently and reduce costs through cost-sharing, but they also make higher payments to providers.
Second, while Medicaid is in some ways bad insurance (because many providers do not accept it), in one way it is better for recipients than just about any private plan- it requires little to no cost-sharing. In many states, Medicaid plans have a $0 deductible and $0 co-pays for all covered services. Federal Medicaid rules prevent deductibles and co-pays from getting anywhere near as high as normal plans, the thought being that Medicaid recipients are too poor to afford them.
These costs, of course, are offset by benefits- especially the greater access to providers through private plans. Do the benefits outweigh the costs? After years of studying what happens in Arkansas, we will get some idea of whether privatization is more or less expensive than traditional Medicaid, and of whether the provider-acceptibility benefits outweigh the poor-people-paying-deductibles costs. But we don’t have to wait to see what the average person thinks- we can just let each individual choose.
Tell each Medicaid recipient that they can either get traditional Medicaid, or choose a plan from the ACA exchange. If you are worried about how much this will cost the state budget, estimate how much traditional Medicaid spends per enrollee and limit the choice of exchange plans to those that cost less than that.
This is a win-win-win: taxpayers save money, Medicaid recipients that value traditional Medicaid’s low cost-sharing can keep their plans, and Medicaid recipients that are willing to put up with some cost-sharing in order to get providers to actually see them can do so.
This should have been bloody obvious. It took me months after hearing about Arkansas to think of it. But apparently people in Iowa are ahead of the curve, and seem to be doing exactly this.
After the King vs Burwell ruling, it is clear that the ACA exchanges are here to stay. It is time to stop trying to fight them and start seeing the incredible pro-poor, pro-market possibilities for reform they create.
Any time now the Supreme Court will rule on the legality of Affordable Care Act subsidies through federal health insurance marketplaces.
A ruling for the administration means we keep the status quo (barring some weird saving construction), so there is nothing for Republicans to respond to.
But what should they do if the court rules for the plaintiffs, and 37 states lose their ACA subsidies?
The caving option is to do a straight renewal of the subsidies; some Congressmen are discussing doing this at least temporarily. But this means giving up a great bargaining position.
Kick Over The Stool
The die-hard conservative option is to do nothing, and hope the ensuing chaos reflects worse on the Democrats. As Jon Gruber has said, the key components of the ACA stand together like a three-legged stool. Without the subsidies, the individual mandate becomes a cruel tax on the poor, and without the mandate (or if people choose to ignore it and pay the fine, as many will without the subsidies) guaranteed issue and community rating mean people can game the system (wait to sign up for insurance until you get sick), creating the mother of all adverse selection problems. If Democrats get more of the blame for the wreck that the health insurance system will become with ACA-minus-subsidies, then Republicans might get the votes to repeal the ACA entirely. But I doubt this would be the case.
The more responsible solution is a compromise- reinstate the subsidies legislatively in return for getting rid of a different part of the ACA they find more offensive. But what would this be? Gruber is right that the major parts of the ACA hang together, and removing one major part by itself is worse than either repealing or keeping the whole thing. Removing only the individual mandate, or only guaranteed issue, or only community rating would be very bad ideas.
I think the employer mandate is the best candidate for one big piece that could be safely removed- and it is the one Democrats are unlikely to go to bat to fight (indeed, we’ve seen the absurd spectacle of the Obama administration trying to delay this part of their own health bill while Republicans sue them to implement it). But would this be such a big victory? It would help business and labor markets, but the employer-based system is still by far the largest alternative to government insurance, and politically it may be unwise for Republicans to weaken it- especially if they continue to attack the parts of the ACA that support the market for individual insurance.
Rather than killing one other big piece of the ACA in return for reinstating subsidies, Republicans could find more success by making many marginal changes to the ACA. Make the subsidies a bit less generous (it is kind of absurd that they currently go up to 400% of the poverty level), cut back a bit on the Medicaid expansion (as most Republicans at the state level have been doing anyway)- reduce Federal contributions a bit, and cut eligibility a bit. Allow a bit more rating in health insurance, especially for health behaviors that are partly in peoples control (like weight).
Add Instead of Subtract
Even better, in the unlikely event that Republicans are willing to spend this chance to do something constructive rather than go after a partial repeal, would be to move forward a new health policy proposal. This could be one of the oldie-but-goodie conservative health reform proposals, like making it easier to sell insurance across state lines, or equalizing the tax treatment of individual and employer insurance. It could be a random new proposal, like getting rid of innovation-hampering Certificate of Need laws. But, if I can be allowed to dream for a moment, they could take this chance to move forward the free-market elements of the ACA.
The fact that many of the ACA ideas were first advanced by the conservative Heritage Foundation and enacted by Mitt Romney has become a political talking point for the left, but it wasn’t simply a coincidence or a big mistake. Before the ACA, the market for individual insurance was largely broken. It is a tough economic question how to apportion the blame for this across markets vs misguided government regulations- but the judgement of voters was clear, and the flaws of the market for individual insurance were a consistent impetus for left-wing solutions up to and including single-payer.
Despite the ACA’s many flaws, it has succeeded in making the market for individual insurance functional enough. Individual insurance could be more convenient, it could certainly be cheaper, but now it basically works. And this changes everything.
Why should the government operate a Medicaid program directly, providing insurance that many doctors refuse to take and that recipients hardly value, when for a similar cost they could give away vouchers for gold-level private insurance plans that doctors will actually accept? Arkansas realized this early on, and got permission from the feds to let Medicaid recipients choose real private plans, freeing them from a low-quality government monopoly.
Republicans should support this privatizing potential of the ACA, and change federal Medicaid rules to allow all states to do this. Or if they really want to push the envelope- and I’d want to study the Arkansas experience much more before supporting this- they could make vouchers for individual plans the new default for Medicaid, and require states to get waivers to do anything else. This would judo flip the ACA into a tool for a huge reduction in the role of government in health insurance.
I just finished the 2002 book of the same name, by Sue Blevins.
Overall I found the book too polemic- it seems like the author doesn’t like Medicare and so wrote down all the arguments she could think of against it, even if some were weak or contradictory. But while I didn’t buy the book’s main arguments, I found a lot of interesting facts within, especially about the history of health insurance. I post them here:
Medicare is funded with public money, but claims are processed by private insurers: “Today, Blue Cross and Blue Shield plans process approximately 90 percent of Medicare Part A claims and about 57 percent of all Part B claims.” (p10)
There was a major government program aimed at covering seniors before the introduction of Medicare in 1965: “On September 13, 1960, President Dwight Eisenhower signed into law the ‘Medical Assistance for the Aged’ program, commonly known as the Kerr-Mills law. The program extended coverage to 10 million seniors whether or not they were receiving Social Security benefits and another 2.4 million on Old Age Assistance. All told, 77 percent of seniors were eligible for government assistance under the Kerr-Mills program.” (p20)
Many European countries set up national health insurance systems before 1914, starting with Germany’s Sickness Insurance Act in 1883. But World War I stopped the campaign to set up such a system in the US: “Compulsory health insurance became negatively linked with ‘made in Germany’ and ‘Bolshevism.'” (p27)
“The first hospital insurance program was created in the United States at Baylor University Hospital in Dallas in 1929…. initially it only covered Dallas schoolteachers” (p29)
The American Medical Association fought for years to shut down physicians’ group practices, until the Supreme Court ruled in 1943 they were violating the Sherman antitrust act. Given the explosion in occupation licensing in recent decades (which the current Court isn’t a fan of either), I think the courts’ unanimous opinion on this case, written by Justice Owen Roberts, should be known more broadly: “Professions exist because people believe they will be better served by licensing specially prepared experts to minister to their needs. The licensed monopolies which professions enjoy constitute in themselves severe restraints upon competition. But they are restraints which depend upon capacity and training, not privilege. Neither do they justify concerted criminal action to prevent the people from developing new methods of serving their needs. The people give the privilege of professional monopoly and the people may take it away.” (p33)
The idea of Medicare hospital insurance started as the King-Anderson bill in Congress, and was strongly backed by then-President Kennedy. Doctors and Republicans didn’t like the bill, and promoted alternatives of their own to try to kill it- the AMA proposed “Eldercare”, Republicans proposed “Bettercare”. Chairman Mills of the Ways and Means committee decides to take a new approach to legislative compromise- instead of splitting the difference between the three plans, just pass all of them- a “three-layered cake”. The Democratic proposal becomes Medicare Part A (hospital insurance), the Republican proposal becomes Medicare Part B (physician insurance), the AMA proposal becomes Medicaid. (p46)
Nowadays we are used to worrying the Medicare is going to bankrupt the federal government, and that much of Medicare’s spending is wasteful. But I didn’t realize that even supporters of Medicare had these worries as far back as 1968. President Johnson, who signed the law, said in 1968 that “Between 1965 and 1975, the cost of living will increase by more than 20 percent. But the cost of health care will increase by nearly 140 percent…. part of these increases will be expanded and improved health services. But a large part of the increase will be unnecessary- a rise which can be prevented.” (p59)
In the year 2000, 18% of medical spending by Medicare beneficiaries was out-of-pocket, a higher rate than that paid by the average American (and many Americans have no insurance at all, so pay everything out of pocket). In some ways Medicare really isn’t good insurance. It doesn’t do the one thing insurance really should, and which private plans are now legally required to do by the ACA- put a cap on how much you could possibly end up spending on medical care. (p72)
Back in the 2012 election, Mitt Romney was in the unenviable position of trying to attack the Affordable Care Act without implicating his own reform in Massachusetts. At the time, like most people, I assumed this attempt to differentiate the two was pure cynical politics. Johnathan Gruber worked on both bills and famously said “Its the same damn law”.
But recently, and actually thanks to the same Johnathan Gruber, I’ve realized there is one very important difference. First, there are some quantitative differences. Some of the ACA’s penalties are much larger, which may lead to more substantial disemployment effects. Also, Massachusetts had a much higher rate of employer-based insurance than the rest of the country to start with, so they had a smaller gap to close with government subsidies (making their reform the cheaper one).
The biggest difference though, and the one I hadn’t thought about until I saw Gruber talk at the American Economic Association meetings, is that Massachusetts had a guaranteed issue law for years before Romneycare. Guaranteed issue means that insurers must cover anyone, regardless of pre-existing conditions or expected costs.
By itself, guaranteed issue ruins health insurance markets. It allows people to go without insurance and pay no premiums until they get sick, then sign up and get huge benefits, then drop insurance again once they are recovered. For guaranteed issue to work, it needs an individual mandate to prevent people from gaming the system; for the individual mandate to work we need subsidies, so that poor people can actually get the insurance they are required to. This trio of reforms- guaranteed issue, the individual mandate, and subsidies- is what Gruber calls the 3-legged stool. Massachusetts only had one leg, and this means individual premiums were sky-high until Romneycare brought the other two legs.
Almost no other states, though, had their own guaranteed issue laws before the ACA- their individual health insurance markets were not nearly as broken as Massachusetts’ was.
Consider 3 policy packages:
1. No Reform
2. Guaranteed issue, individual mandate, subsidized exchanges
3. Guaranteed issue only
Before 2006, most states were at 1, but Mass was at 3. 3 is clearly inferior to both 1 and 2; the choice between 1 and 2 is a tougher one. Romneycare moved Mass from 3 to 2, clearly an improvement that fixed a totally broken individual market. Obamacare moved the rest of the country from 1 to 2, which is much more of a mixed bag. So for once, I think I overestimated the cynicism of a politician; the two laws in effect really were different.