Category Archives: Economics of Health Care

The Tea Party, McBoehner, and ObamaCare

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Tyler Cowen has referred a couple of times to a book by Philip Klein on Republican politics and health care reform. I am not a political analyst, but here is my impression:

1. The most important Republican divide is between the Tea Party and McBoehner. The Tea Party wants policies to change, and McBoehner want most of all to be Senate Majority Leader and House Speaker, respectively.

2. The Tea Party wants to overturn Obama’s policies on immigration and health care. McBoehner wants to loosen environmental regulations and tweak Dodd-Frank, because that is what their friends in business are telling them are priority issues.

3. I think that a conservative consensus on health care reform is there to be formed, but McBoehner are not the ones to form it. I think that the Tea Party is likely to be shafted both on immigration and on health care reform. That might make them a bit ornery during primary season in 2016.

Medicare Spending by Age Group

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Timothy Taylor writes,

on a per capita basis, Medicare costs are rising faster for those at later ages. In 2000, for example, Medicare typically spent about 2.4 times as much for a 90 year-old as for a 65 year-old. By 2011, it was spending about 2.8 times as much

There is much more at the link. He cites a Kaiser Family Foundation analysis.

Something to bear in mind is that the mix of ages within Medicare can change. If you get an increase in “young old” in a given year, then average spending could decline, even though on a lifetime basis Medicare spending is not falling, and may even be rising.

Annual Physicals vs. Evidence

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Ezekiel Emanuel writes,

Those who preach the gospel of the routine physical have to produce the data to show why these physician visits are beneficial. If they cannot, join me and make a new resolution: My medical routine won’t include an annual exam.

He cites controlled experiments showing that the Null Hypothesis is true for the routine physical exam.

Not surprising, really. Ask Robin Hanson.

Pointer from Jason Collins.

Health Care Policy 101

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Obviously, this NYT story deserved a lot of play.

“Harvard employees want access to everything,” said Dr. Barbara J. McNeil, the head of the health care policy department at Harvard Medical School and a member of the benefits committee. “They don’t want to be restricted in what institutions they can get care from.”

As individuals, Harvard employees are like everyone else. We all want unlimited access to medical services without having to pay for them. Of course, once somebody thinks about that for a a second, they realize that it is unworkable. You either have to limit access to services, or you have to make people pay for services so that they ration themselves. Obamacare tries to do some of both. When it tries to limit access, opponents scream “Death panels!” When it tries to make people pay for services, they scream, as some are quoted in the article “You’re putting a tax on the sick!” Among the latter screamers, I am sorry to say, is Jerry Green, a mathematical micro-theorist who goes back to the heyday of that stuff.

If I’m President of Harvard, I would say, “Fine. We’ll get rid of health insurance altogether if you don’t like it. Instead, we’ll give you that money in cash. Go out and buy your own health insurance. Stop complaining to us about the health insurance plan we provide.”

Which is one of many reasons I am not President of Harvard.

The Silver Lining in Obamacare

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Yevgeniy Feyman & Aobo Guo write,

The ACA’s limits on age-based rating, elimination of risk-based rating, and mandated generous minimum benefits have forced premiums to rise. Deductibles and out-of-pocket costs are higher now as well: cost-sharing offers insurers a sharp tool for varying the amounts that consumers pay.

Apparently, for all the hostility toward catastrophic health insurance voiced by Obamacare advocates, the way that competition is structured on the exchanges is leading health insurers toward policies with higher deductibles. For those of us who want market-oriented reforms, this is good news. American consumers need to get used to paying for at least some of their medical services with their own money, and this way the “blame” is placed on the government’s system of health insurance, not on the market.

Levin and Capretta Propose Health Care Alternative

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They write,

The first step is to introduce legislation that would allow any state to opt out of all of ObamaCare’s mandates, regulations, taxes and requirements, and instead opt into a far simpler and more flexible alternative system. In that system, state residents not offered health coverage by their employers could receive a federally funded, age-based credit for the purchase of any state-approved health-insurance product—including those bought outside of any exchange and regardless of whether they meet ObamaCare’s coverage requirements.

And if the legislation is vetoed?

Casey Mulligan on Obamacare Tax Effects

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He said,

In summary, the ACA has three major taxes in it. Two are taxes on full-time employment and the other is a tax on income. They may be implicit, they may be hidden, politicians may not call them taxes, but that’s what they are. Their economic impact on workers varies widely, affecting low-skill workers the most. They create all kinds of productivity problems and will have visible and permanent effects on the economy. I have estimated that employment will be three percent less over the long term because of the ACA, and that national income—or GDP, if you like to think of it that way—will be two percent less. If you look at the productivity costs alone—forgetting the fact that there will be a number of people not working anymore—they come to $6,000 per person who gets health insurance because of the law. And I’m not beginning to count the payments needed for health care providers.

Pointer from Don Boudreaux.

Principles-Based Regulation for Food and Drugs

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Anahad O’Connor writes,

The Food and Drug Administration frequently recalls dietary supplements that are found to contain banned substances. But a new study suggests that many of these products return to store shelves months later with the same dangerous ingredients.

With principles-based regulation, you look at companies to see if they have processes in place to ensure that they follow the right principles. Do the health-food stores have people in charge of checking the labels of what they put on shelves? Do the companies that manufacture drugs have people in charge of making sure that they do not put known dangerous chemicals into the drugs? Do the companies that import drugs from overseas have processes in place to ensure that they are not tainted? etc.

When you find processes that are flawed, you order fixes. When find an absence of processes, you impose heavy penalties, which might include prison for the executives.

W Bent the Cost Curve

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Loren Adler and Adam Rosenberg write,

Despite constituting barely more than 10 percent of Medicare spending, our analysis shows that Part D has accounted for over 60 percent of the slowdown in Medicare benefits since 2011 (beyond the sequestration contained in the 2011 Budget Control Act).

So, it was not so much Obamacare that slowed the growth in Medicare spending. It was the market-oriented and much-reviled prescription drug plan enacted under President Bush.

Casey Mulligan on the ACA and Employment

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Some highlights:

the ACA’s [Obamacare] generous assistance to part-time workers for health insurance premiums and out-of-pocket expenses offsets much of the income they forgo by working fewer hours. The lack of this insurance assistance for full-time workers amounts to a tax on full-time work.

…For 20 percent of the labor force—some 33 million workers—their family’s eligibility for exchange subsidies hinges entirely on their employment status. In any month they work part time or not at all, they can obtain subsidized coverage; in any month they work full time, they do not qualify for these subsidies. Members of this group would, on average, have to work an additional 5.5 hours per week to make up for the subsidies they forgo by working full time.

Because of the penalty on employers who do not offer health insurance, 5 percent of the workforce faces a new implicit income tax. These workers, who are left to obtain coverage from the ACA exchanges, would have to work at least four hours a week for free if they were to compensate their employer for the $2,000-per-employee penalty the ACA imposes.

An additional 21 percent who work for employers not offering coverage will find that their employers are less willing or able to pay their workers because of the ACA’s employer penalty. These workers, on average, would have to work four hours a week for free if they were to compensate their employers for the non-coverage penalty.

See also this NBER paper, although at the moment it is not coming up on the NBER site.