Someone needs to tell Republicans that you’re not actually supposed to govern according to the rhetoric used to gull the rubes.
Someone needs to tell Republicans that you’re not actually supposed to govern according to the rhetoric used to gull the rubes.
Uwe E. Reinhardt:
The Illogic of Employer-Sponsored Health Insurance, by Uwe E. Reinhardt, NY Times: ... Persuaded by both theory and empirical research, most economists believe that employer-based health insurance... ostensibly paid by employers ... is recovered from employees through commensurate reductions in take-home pay.
Evidently the majority of Supreme Court justices who just ruled in Burwell v. Hobby Lobby case do not buy the economists’ theory. These justices seem to believe that the owners of “closely held” business firms buy health insurance for their employees out of the kindness of their hearts and with the owners’ money. On that belief, they accord these owners the right to impose some of their ... religious beliefs ... on their employee’s health insurance. ...
The Supreme Court’s ruling may prompt Americans to re-examine whether the traditional, employment-based health insurance ... is really the ideal platform for health insurance coverage in the 21st century. The public health insurance exchanges established under the Affordable Care Act are likely to nibble away at this system....
In the meantime, the case should help puncture the illusion that employer-provided health insurance is an unearned gift bestowed on them by the owners and paid with the owners’ money, giving those owners the moral right to dictate the nature of that gift.
Why don't we hear more about the success of Obamacare?:
Obamacare Fails to Fail, by Paul Krugman, Commentary, NY Times: How many Americans know how health reform is going? For that matter, how many people in the news media are following the positive developments?
I suspect that the answer to the first question is “Not many,” while the answer to the second is “Possibly even fewer”... And if I’m right, it’s a remarkable thing — an immense policy success is improving the lives of millions of Americans, but it’s largely slipping under the radar.
How is that possible? Think relentless negativity without accountability. The Affordable Care Act has faced nonstop attacks from partisans and right-wing media, with mainstream news also tending to harp on the act’s troubles. Many of the attacks have involved predictions of disaster, none of which have come true. But absence of disaster doesn’t make a compelling headline, and the people who falsely predicted doom just keep coming back with dire new warnings. ...
Yes, there are losers from Obamacare. If you’re young, healthy, and affluent enough that you don’t qualify for a subsidy (and don’t get insurance from your employer), your premium probably did rise. And if you’re rich enough to pay the extra taxes that finance those subsidies, you have taken a financial hit. But it’s telling that even reform’s opponents aren’t trying to highlight these stories. Instead, they keep looking for older, sicker, middle-class victims, and keep failing to find them.
Oh,... the overwhelming majority of the newly insured, including 74 percent of Republicans, are satisfied with their coverage.
You might ask why, if health reform is going so well, it continues to poll badly. It’s crucial ... to realize that Obamacare, by design, by and large doesn’t affect Americans who already have good insurance. As a result, many peoples’ views are shaped by the mainly negative coverage in the news... Still, the latest tracking survey from the Kaiser Family Foundation shows that a rising number of Americans are hearing about reform from family and friends, which means that they’re starting to hear from the program’s beneficiaries.
And as I suggested earlier, people in the media — especially elite pundits — may be the last to hear the good news, simply because they’re in a socioeconomic bracket in which people generally have good coverage.
For the less fortunate, however, the Affordable Care Act has already made a big positive difference. The usual suspects will keep crying failure, but the truth is that health reform is — gasp! — working.
Why heve predictions from "the enemies of health reform" been so wrong?:
The Incompetence Dogma, by Paul Krugman, Commentary, NY Times: Have you been following the news about Obamacare? The Affordable Care Act has receded from the front page, but information about how it’s going keeps coming in — and almost all the news is good. Indeed, health reform has been on a roll ever since March, when it became clear that enrollment would surpass expectations despite the teething problems of the federal website.
What’s interesting about this success story is that it has been accompanied at every step by cries of impending disaster. At this point, by my reckoning, the enemies of health reform are 0 for 6. That is, they made at least six distinct predictions about how Obamacare would fail — every one of which turned out to be wrong.
“To err is human,” wrote Seneca. “To persist is diabolical.” Everyone makes incorrect predictions. But to be that consistently, grossly wrong takes special effort. So what’s this all about?
Many readers won’t be surprised by the answer:... a dogmatic belief in public-sector incompetence — is now a central part of American conservatism, and the incompetence dogma has evidently made rational analysis of policy issues impossible.
It wasn’t always thus. If you go back two decades, to the last great fight over health reform, conservatives seem to have been relatively clearheaded about the policy prospects, albeit deeply cynical. ...
But that was before conservatives had fully retreated into their own intellectual universe. Fox News didn’t exist yet; policy analysts at right-wing think tanks had often begun their careers in relatively nonpolitical jobs. It was still possible to entertain the notion that reality wasn’t what you wanted it to be.
It’s different now. It’s hard to think of anyone on the American right who even considered the possibility that Obamacare might work, or at any rate who was willing to admit that possibility in public. Instead, even the supposed experts kept peddling improbable tales of looming disaster...
And let’s be clear: While it has been funny watching the right-wing cling to its delusions about health reform, it’s also scary. After all, these people retain considerable ability to engage in policy mischief, and one of these days they may regain the White House. And you really, really don’t want people who reject facts they don’t like in that position. I mean, they might do unthinkable things, like starting a war for no good reason. Oh, wait.
Don't let "zombie arguments" derail health care reform:
Veterans and Zombies, by Paul Krugman, Commentary, NY Times: You’ve surely heard about the scandal at the Department of Veterans Affairs. A number of veterans found themselves waiting a long time for care, some of them died before they were seen, and some of the agency’s employees falsified records to cover up the extent of the problem. It’s a real scandal...
But the goings-on at Veterans Affairs shouldn’t cause us to lose sight of a much bigger scandal:... the Veterans Affairs scandal, while real, is being hyped out of proportion by people whose real goal is to block reform of the larger system.
The essential, undeniable fact about American health care is how incredibly expensive it is — twice as costly per capita as the French system, two-and-a-half times as expensive as the British system. You might expect all that money to buy results, but the United States actually ranks low on basic measures of performance...
As you might guess, conservatives don’t like the observation that American health care performs worse than other countries’ systems because it relies too much on the private sector and the profit motive. So whenever someone points out the obvious, there is a chorus of denial... It turns out, however, that such claims invariably end up relying on zombie arguments — that is, arguments that have been proved wrong, should be dead, but keep shambling along because they serve a political purpose.
Which brings us to veterans’ care. ... It’s still true that Veterans Affairs provides excellent care, at low cost. Those waiting lists arise partly because so many veterans want care, but Congress has provided neither clear guidelines on who is entitled to coverage, nor sufficient resources to cover all applicants. ...
Yet, on average, veterans don’t appear to wait longer for care than other Americans. And does anyone doubt that many Americans have died while waiting for approval from private insurers?
A scandal is a scandal... But beware of people trying to use the veterans’ care scandal to derail health reform.
And here’s the thing: Health reform is working. Too many Americans still lack good insurance, and hence lack access to health care and protection from high medical costs — but not as many as last year, and next year should be better still. Health costs are still far too high, but their growth has slowed dramatically. We’re moving in the right direction, and we shouldn’t let the zombies get in our way.
Medicare growth is really low: ... It turns out that actual Medicare growth for the first eight months of the fiscal year has been 0.3%. That’s amazing. But, of course, there are some temporary policies in place that have been restraining spending. These include things like the seqester, some ACA stuff, and frozen means-tested Medicare premium income thresholds.* Without these policies in place, growth would have been 2.5%. ...
Economic growth is 3.9%. That means that Medicare growth is nowhere near the GDP + 1% or so that would be needed to see the IPAB kick in. This has important, and positive, effects on the long-term federal budget outlook.
*Of course, there are temporary ACA-related things like the filling-in donut hole, which are increasing spending as well, so actual growth is likely less. Amazing!
Unique economics of healthcare: I was prompted to write this follow-up on health economics following a recent post by blogger Noah Smith, who weighs in with some reasonable views after some intense criticism of the ‘freakonomic’ Chicago-boy Steven Levitt. In a meeting with UK PM David Cameron, Levitt and his co-author apparently made some rather absurd remarks to him about health care.They told him that the U.K.’s National Health Service -- free, unlimited, lifetime heath care -- was laudable but didn’t make practical sense."We tried to make our point with a thought experiment," they write. "We suggested to Mr. Cameron that he consider a similar policy in a different arena. What if, for instance...everyone were allowed to go down to the car dealership whenever they wanted and pick out any new model, free of charge, and drive it home?"Rather than seeing the humor and realizing that health care is just like any other part of the economy, Cameron abruptly ended the meeting...
This nonsense reminds me that what constitutes economic debate in the US is often laughable at best.
Health care is obviously not like most other parts of the economy. As I said last week medical services are credence goods - goods which we don’t know whether we need, and even once we’ve consumed them, still don’t know if they were good value. In economic terms, these goods suffer from the worse of possible information failures, particularly with respect to the asymmetry of information between the seller (in this case the doctor) and the consumer.
For these goods the demand curve may slope any which way, and people are often left to use price as the only signal of quality (or quantity for that matter). This means that a socially optimal level of medical service provision cannot be determined using basic marginal economic analysis. ...
Surprise! Republicans are opposed to Obamacare. But the lengths they'll go to to validate their beliefs in the face of evidence to the contrary is startling:
Inventing a Failure, by Paul Krugman, Commentary, NY Times: On Thursday, House Republicans released a deliberately misleading report on the status of health reform, crudely rigging the numbers to sustain the illusion of failure in the face of unexpected success. Are you shocked?
You aren’t, but ... the fact that this has become standard operating procedure for a major party bodes ill for America’s future.
About that report: The really big policy news of 2014, at least so far, is the spectacular recovery of the Affordable Care Act from its stumbling start... This is a problem for Republicans, who have bet the ranch on the proposition that health reform is an unfixable failure. ... How can they respond to good news?
Well,... they have ... continued to do what they’ve been doing ever since the news on Obamacare started turning positive: sling as much mud as possible at health reform, in the hope that some of it sticks. Premiums were soaring, they declared, when they have actually come in below projections. Millions of people were losing coverage, they insisted, when the great bulk of those whose policies were canceled simply replaced them with new policies. The Obama administration was cooking the books, they cried (projection, anyone?). And, of course, they keep peddling horror stories about people suffering terribly from Obamacare, not one of which has actually withstood scrutiny.
Now comes the latest claim — that many of the people who signed up for insurance aren’t actually paying their premiums. ... Previous attacks on Obamacare were pretty much fact-free; this time the claim was backed by an actual survey purporting to show that a third of enrollees hadn’t paid their first premium.
But the survey was rigged. (Are you surprised?) ...
So why are Republicans doing this? Sad to say, there’s method in their fraudulence.
First of all, it fires up the base. ... Beyond that, the constant harping on alleged failure works as innuendo even if each individual claim collapses in the face of evidence. ...
So Republicans are spreading disinformation about health reform because it works, and because they can — there is no sign that they pay any political price when their accusations are proved false.
And that observation should scare you. What happens to the Congressional Budget Office if a party that has learned that lying about numbers works takes full control of Congress? What happens if it regains the White House, too? Nothing good, that’s for sure.
Dreaming of politicians on the right who actually care about the unemployed, the uninsured, and the unfortunate. But it's just a dream:
Health Care Nightmares, by Paul Krugman, Commentary, NY Times: When it comes to health reform, Republicans suffer from delusions of disaster. They know, just know, that the Affordable Care Act is doomed to utter failure, so failure is what they see, never mind the facts on the ground.
Thus, on Tuesday, Mitch McConnell, the Senate minority leader, dismissed the push for pay equity as an attempt to “change the subject from the nightmare of Obamacare”; on the same day, the nonpartisan RAND Corporation released a study estimating “a net gain of 9.3 million in the number of American adults with health insurance coverage...” Some nightmare. And the overall gain ... must be considerably larger.
But ... Obamacare is looking like anything but a nightmare... It will be months before we have a full picture, but it’s clear that the number of uninsured Americans has already dropped significantly...
Republicans clearly have no idea how to respond... At the state level, however, Republican governors and legislators are still in a position to block the act’s expansion of Medicaid, denying health care to millions of vulnerable Americans. And they have seized that opportunity with gusto: Most Republican-controlled states, totaling half the nation, have rejected Medicaid expansion. ...
What’s amazing about this wave of rejection is that it appears to be motivated by pure spite. The federal government is prepared to pay for Medicaid expansion, so it would cost the states nothing, and would, in fact, provide an inflow of dollars. ...Jonathan Gruber ... recently summed it up: The Medicaid-rejection states “are willing to sacrifice billions of dollars of injections into their economy in order to punish poor people. It really is just almost awesome in its evilness.” Indeed.
And while supposed Obamacare horror stories keep on turning out to be false, it’s already quite easy to find examples of people who died because their states refused to expand Medicaid. According to one recent study, the death toll from Medicaid rejection is likely to run between 7,000 and 17,000 Americans each year.
But nobody expects to see a lot of prominent Republicans declaring that rejecting Medicaid expansion is wrong, that caring for Americans in need is more important than scoring political points against the Obama administration. As I said, there’s an extraordinary ugliness of spirit abroad in today’s America, which health reform has brought out into the open.
And that revelation, not reform itself — which is going pretty well — is the real Obamacare nightmare.
Supporters of health reform should "go ahead and celebrate":
Rube Goldberg Survives, by Paul Krugman, Commentary, NY Times: Holy seven million, Batman! ...Obamacare has made a stunning comeback from its shambolic start..., the original target of seven million signups, widely dismissed as unattainable, has been surpassed.
But what does it mean? That depends on whether you ask the law’s opponents or its supporters. You see, the opponents think that it means a lot, while the law’s supporters are being very cautious. And, in this one case, the enemies of health reform are right. This is a very big deal indeed.
Of course, you don’t find many Obamacare opponents admitting outright that 7.1 million and counting signups is a huge victory... But their reaction to the results — It’s a fraud! They’re cooking the books! — tells the tale. ...
So why are many reform supporters ... telling us not to read too much into the figures? ... I’d argue that they’re missing the forest for the trees.
The crucial thing to understand about the Affordable Care Act is that it’s a Rube Goldberg device, a complicated way to do something inherently simple. ... Remember, giving everyone health insurance doesn’t have to be hard; you can just do it with a government-run program..., extending Medicare to everyone would have been technically easy.
But it wasn’t politically possible,... health reform had to be run largely through private insurers, and be an add-on to the existing system... And, as a result, it had to be somewhat complex. ... It’s a system in which many things can go wrong; the nightmare scenario has always been that conservatives would seize on technical problems to discredit health reform... And last fall that nightmare seemed to be coming true.
But the nightmare is over. ... Now we know that the technical details can be managed... This thing is going to work.
And, yes, it’s also a big political victory for Democrats. They can point to a system that is already providing vital aid to millions of Americans, and Republicans — who were planning to run against a debacle — have nothing to offer in response. And I mean nothing. ...
So my advice to reform supporters is, go ahead and celebrate. Oh, and feel free to ridicule right-wingers who confidently predicted doom.
Clearly, there’s a lot of work ahead, and we can count on the news media to play up every hitch and glitch as if it were an existential disaster. But Rube Goldberg has survived; health reform has won.
Health Care Horror Hooey, by Paul Krugman, Commentary, NY Times: Remember the “death tax”? The estate tax is quite literally a millionaire’s tax — a tax that affects only a tiny minority of the population, and is mostly paid by a handful of very wealthy heirs. Nonetheless, right-wingers have successfully convinced many voters that the tax is a cruel burden on ordinary Americans...
You might think that such heart-wrenching cases are actually quite rare, but you’d be wrong: they aren’t rare; they’re nonexistent. In particular, nobody has ever come up with a real modern example of a family farm so ld to meet estate taxes. The whole “death tax” campaign has rested on eliciting human sympathy for purely imaginary victims.
And now they’re trying a similar campaign against health reform. ...
Even supporters of health reform are somewhat surprised by the right’s apparent inability to come up with real cases of hardship. Surely there must be some people somewhere actually being hurt by a reform that affects millions of Americans. Why can’t the right find these people and exploit them?
Sophistry, a concept taught by the ancient Greek philosophers in order for a rhetorician to recognise spurious logic and arguments, is alive...See All Comments Write a comment
The most likely answer is that the true losers from Obamacare generally aren’t very sympathetic. For the most part, they’re either very affluent people affected by the special taxes that help finance reform, or at least moderately well-off young men in very good health who can no longer buy cheap, minimalist plans. Neither group would play well in tear-jerker ads.
No, what the right wants are struggling average Americans, preferably women, facing financial devastation from health reform. So those are the tales they’re telling, even though they haven’t been able to come up with any real examples.
Hey, I have a suggestion: Why not have ads in which actors play Americans who have both lost their insurance thanks to Obamacare and lost the family farm to the death tax? I mean, once you’re just making stuff up, anything goes.
The CBO's report on Obamacare is --surprise -- being misrepresented:
Health, Work, Lies, by Paul Krugman, Commentary, NY Times: ... On Tuesday, the budget office released a report on the fiscal and economic ... effects of the Affordable Care Act. ...
The budget office has now increased its estimate of the size of these effects. It believes that health reform will reduce the number of hours worked in the economy by between 1.5 percent and 2 percent, which it unhelpfully noted “represents a decline in the number of full-time-equivalent workers of about 2.0 million.”
Why was this unhelpful? Because politicians and, I’m sorry to say, all too many news organizations immediately seized on the 2 million number and utterly misrepresented its meaning. For example, Representative Eric Cantor, the House majority leader, quickly posted this on his Twitter account: “Under Obamacare, millions of hardworking Americans will lose their jobs and those who keep them will see their hours and wages reduced.”
Not a word of this claim was true. The budget office report didn’t say that people will lose their jobs. It declared explicitly that the predicted fall in hours worked will come “almost entirely because workers will choose to supply less labor” ... Oh, and because labor supply will be reduced, wages will go up, not down.
We should add that the budget office believes that health reform will actually reduce unemployment over the next few years. ...
So was Mr. Cantor being dishonest? Or was he just ignorant of the policy basics...? It doesn’t matter — because even if it was ignorance, it was willful ignorance. Remember, the campaign against health reform has, at every stage, grabbed hold of any and every argument it could find against insuring the uninsured, with truth and logic never entering into the matter.
Think about it. We had the nonexistent death panels. We had false claims that the Affordable Care Act will cause the deficit to balloon. We had supposed horror stories about ordinary Americans facing huge rate increases, stories that collapsed under scrutiny. And now we have a fairly innocuous technical estimate misrepresented as a tale of massive economic damage.
Meanwhile, the reality is that American health reform — flawed and incomplete though it is — is making steady progress. No, millions of Americans won’t lose their jobs, but tens of millions will gain the security of knowing that they can get and afford the health care they need.
It's even worse for women:
US ranks near bottom among industrialized nations in efficiency of health care spending. EurekAlert: A new study by researchers at the UCLA Fielding School of Public Health and McGill University in Montreal reveals that the United States health care system ranks 22nd out of 27 high-income nations when analyzed for its efficiency of turning dollars spent into extending lives.
The ... U.S.'s inferior ranking reflects a high price paid and a low return on investment. For example, every additional hundred dollars spent on health care by the United States translated into a gain of less than half a month of life expectancy. In Germany, every additional hundred dollars spent translated into more than four months of increased life expectancy.
The researchers also discovered significant gender disparities within countries.
"Out of the 27 high-income nations we studied, the United States ranks 25th when it comes to reducing women's deaths," said Dr. Jody Heymann, senior author of the study and dean of the UCLA Fielding School of Public Health. "The country's efficiency of investments in reducing men's deaths is only slightly better, ranking 18th." ...
"While there are large differences in the efficiency of health spending across countries, men have experienced greater life expectancy gains than women per health dollar spent within nearly every country," said Douglas Barthold, the study's first author...
A Health Care Mystery Explained: Ezra Klein is puzzled ... by Republican hypocrisy on health care. For many years the GOP has advocated things that are supposed to bring the magic of the marketplace and individual incentives to health care: higher deductibles to give people “skin in the game”, competition among private insurers via exchanges — competition that would include reducing costs by limiting networks — and, of course, for cuts in Medicare. Now the GOP complains bitterly that some Obamacare policies have high deductibles, that it relies on the horror of exchanges, that some networks are limited, and that there are cuts in Medicare.
Klein suggests that Republicans are really upset by other aspects of Obamacare, but are going after the easy targets even though they’re attacking their own ideas. ... I suspect that he knows that the issue is both bigger and simpler than he says. ...
The purpose of most health care reform is to help the unfortunate — people with pre-existing conditions, people who don’t get insurance through their jobs, people who just don’t earn enough to afford insurance. Cost control is also part of the picture, but not the dominant part. ...
And here’s the thing: Republicans don’t want to help the unfortunate. They’ll propound health-care ideas that will, they claim, help those with preexisting conditions and so on — but those aren’t really proposals, they’re diversionary tactics designed to stall real health reform. ...
Hence the rage of the right. Here they were, with a whole raft of ideas they could throw out, like chaff thrown out to confuse enemy radar, to divert and confuse any attempt to actually provide insurance to the uninsured. And those dastardly Democrats have gone ahead and actually incorporated those ideas into real reform.
Once you realize this, you also realize that people who warn that by opposing Obamacare Republicans are undermining their own proposals are missing the point. Yes, the Ryan plan to privatize Medicare looks a lot like Obamacare — but Ryan comes to Medicare not to save it, but to bury it, so the question of whether his plan could work is irrelevant.
There’s no mystery here; it’s just top-down class warfare as usual.
Bending the cost curve:
Obamacare’s Secret Success, by Paul Krugman, Commentary, NY Times: The law establishing Obamacare was officially titled the Patient Protection and Affordable Care Act. And the “affordable” bit wasn’t just about subsidizing premiums. It was also supposed to be about “bending the curve” — slowing the seemingly inexorable rise in health costs. ...
So, how’s it going? ... Has the curve been bent?
The answer, amazingly, is yes. In fact, the slowdown in health costs has been dramatic .... Since 2010, when the act was passed, real health spending per capita ... has risen less than a third as rapidly as its long-term average. Real spending per Medicare recipient hasn’t risen at all; real spending per Medicaid beneficiary has actually fallen slightly.
What could account for this good news? One obvious answer is the still-depressed economy, which might be causing people to forgo expensive medical care. But this explanation turns out to be problematic in multiple ways. ...
A better story focuses on what appears to be a decline in ... expensive new blockbuster drugs, even as existing drugs go off-patent and can be replaced with cheaper generic brands. ... But since drugs are only about 10 percent of health spending, it can only explain so much.
So what aspects of Obamacare might be causing health costs to slow? One clear answer is the act’s reduction in Medicare “overpayments”... A less certain but likely source of savings involves changes in the way Medicare pays for services. The program now penalizes hospitals if many of their patients end up being readmitted soon after being released — an indicator of poor care — and readmission rates have, in fact, fallen substantially. Medicare is also encouraging ... “accountable care,” in which health organizations get rewarded for overall success in improving care while controlling costs.
Furthermore, there’s evidence that Medicare savings “spill over” to the rest of the health care system...
And the biggest savings may be yet to come. The Independent Payment Advisory Board, a panel with the power to impose cost-saving measures (subject to Congressional overrides) if Medicare spending grows above target, hasn’t yet been established, in part because of the near-certainty that any appointments to the board would be filibustered by Republicans yelling about “death panels.” Now that the filibuster has been reformed, the board can come into being.
The news on health costs is, in short, remarkably good..., health reform is starting to look like a bigger success than even its most ardent advocates expected.
Obamacare can work:
California, Here We Come?, by Paul Krugman, Commentary, NY Times: It goes without saying that the rollout of Obamacare was an epic disaster. But what kind of disaster was it? Was it a failure of management, messing up the initial implementation of a fundamentally sound policy? Or was it a demonstration that the Affordable Care Act is inherently unworkable? ...
Well, your wish is granted. Ladies and gentlemen, I give you California.
Now, California isn’t the only place where Obamacare is looking pretty good. A number of states that are running their own online health exchanges instead of relying on HealthCare.gov are doing well. ...
California is, however, an especially useful test case. First of all, it’s huge: if a system can work for 38 million people, it can work for America as a whole. Also, it’s hard to argue that California has had any special advantages other than that of having a government that actually wants to help the uninsured. ...
For one thing, enrollment is surging. ... To work as planned, health reform has to produce a balanced risk pool — that is, it must sign up young, healthy Americans as well as their older, less healthy compatriots. And so far, so good: in October, 22.5 percent of California enrollees were between the ages of 18 and 34, slightly above that group’s share of the population.
What we have in California, then, is a proof of concept. Yes, Obamacare is workable — in fact, done right, it works just fine.
The bad news, of course, is that most Americans aren’t lucky enough to live in states in which Obamacare has, in fact, been done right. They’re stuck either with HealthCare.gov or with one of the state exchanges, like Oregon’s, that have similar or worse problems. Will they ever get to experience successful health reform?
The answer is, probably yes. ...
There will also probably be growing use of workarounds — for example, encouraging people to go directly to insurers. This will temporarily defeat one of the purposes of the exchanges, which was to make price comparisons easy, but it will be good enough as a short-term patch. And one shouldn’t forget that the insurance industry has a big financial stake in the success of Obamacare, and will soon be pitching in with big efforts to sign people up.
Again, Obamacare’s rollout was a disaster. But in California we can see what health reform will look like, beyond the glitches. And it’s going to work.
David Warsh on Republican opposition to the Affordable Care Act:
One Simple Step: ... What accounts for the ferocity of the opposition to the individual mandate as a means of assuring that all citizens are medically insured? What’s at stake here, I think, is the Republican Party’s wish to be seen as the party of reform. Traditionally, conservatives in US politics have been those who seek to defend the status quo, good and bad, whatever it is, while reformers are those who promise to improve matters, one way or another. Ronald Reagan was the master of these traditional conservatives, content as he was to affirm the achievements of the New Deal and the Second World War, but ready to insist that they had gone far enough, at least for a time.
It was only after Reagan left office that young Republicans eager to occupy the White House sought to present themselves as the party of reform, House speaker Newt Gingrich with his “opportunity society,” George W. Bush with his “ownership society.” These reforms had to do mainly with curtailing or eliminating altogether measures that had been adopted in the past, the Social Security retirement system chief among them, in the name of aggregate economic efficiency and growth.
The individual health insurance mandate is an invention of those times. It was proposed twenty-five years ago by Republican strategists at the Heritage Foundation, a conservative Washington think-tank, partly as a means of dealing with the problem of those who cannot obtain or cannot afford medical insurance. Essentially, it was a public health measure, tantamount to creating a new personal responsibility to have a doctor and, presumably, listen to him or her to some degree (don’t drink those half-gallon sodas).
Massachusetts Republican governor Mitt Romney put the individual mandate into practice in 2005 as a step toward a presidential campaign. But in 2008 the Democrats wrested the reform impulse away from the Republicans and, In 2010, passed the measure themselves. The bitter mood of the present day has everything to do with whether the Democrats or the Republicans are to be viewed going forward as the party of practical reform. ...
Having the Backbone to Set Minimum Standards for Health Insurance: Democrats are showing once again they have the backbones of banana slugs.
The Affordable Care Act was meant to hold insurers to a higher standards. So it stands to reason that some insurers will have to cancel their lousy sub-standard policies.
But spineless Democrats (including my old boss Bill Clinton) are caving in to the Republican-fueled outrage that the President “misled” Americans into thinking they could keep their old lousy policies — and are now urging the White House to forget the new standards and let people keep what they had before.
And some congressional Republicans are all too eager to join them, and allow insurers to offer whatever crap they were offering before...
Alan Blinder defends Obamacare:
Despite a Botched Rollout, the Health-Care Law Is Worth It, by Alan S. Blinder, Commentary, WSJ: The botched rollout of ... "ObamaCare") has been an unmitigated disaster. Choose your favorite adjective: horrible, embarrassing, inexcusable. They all fit.
But a badly designed website doesn't signify a badly designed policy. The goals, principles and major design features of the ACA are barely affected by the government's health-exchange website catastrophe. If you liked the basic ideas before, you still should. ...
Unfortunately, that simple message may not penetrate the public consciousness. ... Remember, in politics, spin is often more important than reality. ... If we could get people to turn their attention from PR to policy—a big if—they would see that little has changed. The three central elements of ObamaCare are insurance reform, getting (most of) the uninsured covered, and containing the upward spiral in medical-care costs. Each remains in place. ...
Considering all these problems, is the game worth the candle? Absolutely—because the status quo ante was so unacceptable. America cannot be a humane society if we leave 15% of our population uninsured. America cannot be an efficient society if we spend 50% to 100% more of our incomes on health care than other countries, and yet don't get better health outcomes. We can't let a botched website get in the way of goals that big.
Nicholas Bagley at The Incidental Economist:
Why doesn’t competition drive out inefficient health care technology?: So here’s a burning question. There’s a consensus that the primary driver of escalating health-care costs is the rapid adoption of new and expensive medical technology. Much of that technology is untested and of questionable medical value. Yet private insurance plans typically cover most any intervention that physicians say is medically necessary. ...
Why? Why don’t private plans compete on price by refusing to cover costly, unproven therapies? ... One answer you sometimes hear is that the law gets in the way. ... We want to contain costs, but the courts won’t let us do it.
The law can’t be the real story, however. As it stands, a federal statute—ERISA—gives employer-sponsored plans almost complete freedom to tailor their coverage packages as they like. ... ERISA even shields a plan from liability if it negligently refuses to authorize coverage for care that it (wrongly) thinks is medically unnecessary. As safe legal harbors go, it doesn’t get any better than ERISA.
Why, then, are private plans so cautious? I’m speculating a little here... For starters, it’s really hard to make good coverage decisions. The data for making them are usually quite poor... And, absent convincing data, a plan that excludes a promising treatment risks alienating physicians and hospitals (not to mention patients). No individual plan has the right incentives to generate that kind of convincing data because, once it does, its competitors will ... take advantage of the leading plan’s research investments.
What’s more, most coverage decisions aren’t crisp (“No proton-beam therapy, period.”). They’re qualified: if a patient has a certain risk-profile, or an identifiable need, then the intervention is covered. But once a plan has said that some patients are eligible for a particular treatment, it’s hard to stop those outside that group from getting the treatment, too. ...
Against this backdrop, piggybacking on Medicare’s coverage determinations makes good sense. Not only does it allow plans to sidestep the collective-action problem that plagues efforts to develop good coverage data. It also helps plans avoid public backlash because they can be confident that their competitors will also follow Medicare’s lead. The government’s seal of approval lends legitimacy to a coverage exclusion that might otherwise appear hard-hearted.
Employer-sponsored plans aren’t the only private plans around, of course. And, as it happens, the law has more bite outside of the employer setting. ... But for employer-sponsored plans, the law isn’t the problem. Far from restraining these plans, the law enables them to tackle the rising costs of technology. There’s just not a business case for it—at least not yet.
Adrianna McIntyre at The Incidental Economist:
Where is the outrage over employer-sponsored coverage in the “rate shock” debate?, by Adrianna McIntyre: I’ve been keeping pretty close tabs on the “rate shock” debate... It’s a complicated issue, and prophecies about young adult enrollment, including my own, have relied on broad strokes and guesswork. But one thing in particular has been grating on me: when it comes to complaints about redistribution and overly-generous benefits in health insurance, why is the echo chamber limited to the individual market? Where is the outrage over employer-sponsored insurance? ...
Some 90% of people with private insurance receive it through an employer, and those plans are generally priced using “pure” experience-rating. This means the company serves as one giant risk pool, and a firm’s youngest employees have the exact same insurance premium as their eldest colleagues. The practice has roots in tradition and history; unions started negotiating these kinds of contracts after World War II, and other plans followed suit. But it’s also a matter of law: HIPAA and the ADA prohibit premium variation by health status. Age rating is constrained somewhat—though not entirely—by the Age Discrimination in Employment Act.
Yet, I’ve seen exactly zero Obamacare opponents railing to amend the employer-based practices that require most young healthies to pay more than their “fair share.” No one is plying Congress to amend HIPAA or the ADA so young invincibles can pay premiums appropriate to their health status. No one is calling out employers on their “redistributionist” policies, even though uniform insurance premiums force a substantial transfer from the young to the old. It makes histrionics over Obamacare’s 3:1 age band hard to take seriously. ...
I know many conservative wonks find fault in ties between employment and insurance, but they haven’t injected that into recent critiques. If messaging around rate shock is more than opportunistic hackery—if it’s genuinely about how “health insurance” ought to be conceived—why are they leaving the most prevalent and most redistributive form of private coverage unscathed? Surprise me.
Jared Bernstein tries to make clear that there's nothing new here:
The Latest ACA Dust-Up Should Not be a Dust-Up: Like Igor Volsky, you might ask yourself why this particularly story has any legs right now since it’s re-litigating an issue that was widely debated a few years. But the answer is obvious: tis the season to attack the Affordable Care Act, no matter if this one is a greatest hit from 2010.
At issue is the President’s claim when selling health care reform that if you like your current health plan, you can keep it. That point in turn was based on the provision that grandfathered existing plans in the individual market (neither employer-based or government provided) by granting exemptions from various standards and consumer protections that came into effect when the law was signed in 2010.
However, as clearly stated at the time, if such a plan were to significantly changes in ways that are inconsistent with consumer protections under the ACA, that it would lose its grandfathered status.
Like I said, this has been known since the law was written. In fact, go here to see a 2010 publication by my CBPP colleague Sarah Lueck that lists the ways plans can lose its grandfathered status, like eliminating benefits to treat certain conditions or significantly raising co-pays beyond what’s implied by the rate of medical price inflation. ...
So, did the President misspeak? In a way, sure. He should have said: “If you like your plan and it doesn’t get significantly worse such that it’s out of sync with what we’re trying to do here, you can keep it.”
And, in fact, such nuances were clear at the time and not buried in the weeds but discussed in the open. Not much to see here folks…move along.
Did Obamacare have to be so complicated?:
The Big Kludge, by Paul Krugman, Commentary, NY Times: The good news about HealthCare.gov, the portal to Obamacare’s health exchange, is that the administration is no longer minimizing its problems. That’s the first step toward fixing the mess — and it will get fixed... But while we wait for the geeks to do their stuff, let’s ask a related question: Why did this thing have to be so complicated in the first place? ...
Imagine ... a much simpler system in which the government just pays your major medical expenses..., you wouldn’t have to shop for insurance..., you’d be covered automatically by virtue of being an American.
Of course ... such a system ... already exists. It’s called Medicare..., and it’s enormously popular. So why didn’t we just extend that system to cover everyone?
The proximate answer was politics: Medicare for all just wasn’t going to happen, given both the power of the insurance industry and the reluctance of workers who currently have good insurance through their employers to trade that insurance for something new. Given these political realities, the Affordable Care Act was probably all we could get — and make no mistake, it will vastly improve the lives of tens of millions of Americans.
Still,... Obamacare is an immense kludge — a clumsy, ugly structure that more or less deals with a problem, but in an inefficient way. ... And the main reason that is happening, I’d argue, is ideology. ...
Republicans still dream of dismantling Medicare as we know it, instead giving seniors vouchers to buy private insurance. In effect..., they want to convert Medicare into Obamacare.
Why would we want to do ... these things? You might say, to reduce the burden on taxpayers — but Medicare is cheaper than private insurance...
No, the assault on Medicare is really about an ideology that is fundamentally hostile to the notion of the government helping people... And this ideology, at a fundamental level ... is why Obamacare ended up being a big kludge.
In saying this I don’t mean to excuse the officials and contractors who made such a mess of health reform’s first month. ... For now, the priority is to get this kludge working, and once that’s done, America will become a better place.
In the longer run, however, we have to tackle that ideology. A society committed to the notion that government is always bad will have bad government. And it doesn’t have to be that way.
I set this piece on part-time employment and Obamacare aside to post, but hadn't gotten back to it yet. Fortunately, Brad DeLong did it for me:
Why Do Smart Republican Economists Continue to Claim that ObamaCare Is Causing a Significant Fall in Full-Time Employment Right Now?: Max Sawicky shows up writing for the extremely useful Economic POlicy Institute: Obamacare Isn’t Causing an Increase in Part-Time Employment, in One Chart:
One of the more baffling messages in the current debate over the economy and “Obamacare” is the hue and cry over the trend in part-time employment. The fact is that since the end of the Great Recession, the trend in part-time employment has been down, not up…. The navy blue region show the level of workers who are part time due to “non-economic” reasons (health, child care responsibilities, etc.). The vertical bars denote recessions, from peak to trough.
Under the Affordable Care Act, employers will be required to provide insurance to workers who work for more than 30 hours a week. This mandate does not take effect for another year. There is no reason why anticipation of it should increase part-time employment in the meantime. And at any rate, such employment has been falling before and after the passage of Obamacare. For more on this, see articles by Jared Bernstein and Paul Van de Water and Helene Jorgenson and Dean Baker. For more on the employer mandate, see this post from EPI’s Josh Bivens.
Yet we have Michael Boskin...[quote]...
And Greg Mankiw:
A Striking Labor Market Fact: John Lott points out the following: "So far this year there have been 848,000 new jobs. Of those, 813,000 are part time jobs.... To put it differently, an incredible 96% of the jobs added this year were part-time jobs."
What are they thinking?
I mean, some employers are going to drop hours below 30 a week once the employer pay-or-play hits. But we won't see that until the February 2015 employment report, and there is no reason for employers to start that eighteen months in advance. It isn't there in the data. And nothing would lead anybody to expect that it would be visible in the data right now.
So why are they claiming that it is?
I should also note that the figure Mankiw cited is wrong.
Bad news is good news:
Reform Turns Real, by Paul Krugman, Commentary, NY Times: At this point, the crisis in American governance has taken on a life of its own. ... But this confrontation did start with a real issue: Republican efforts to stop Obamacare from going into effect. It’s long been clear that the great fear of the Republican Party was not that health reform would fail, but that it would succeed. And developments since Tuesday, when the exchanges on which individuals will buy health insurance opened for business, strongly suggest that their worst fears will indeed be realized: This thing is going to work.
Wait a minute, some readers are saying. Haven’t many stories so far been of computer glitches...? Indeed, they have. But everyone knowledgeable about the process always expected some teething problems, and the nature of this week’s problems has actually been hugely encouraging for supporters of the program. ...
The ... glitches ... for the most part, to be the result of the sheer volume of traffic, which has been much heavier than expected. And this means that one big worry of Obamacare supporters — that not enough ... would ... sign up — is receding fast. ...
What we still don’t know, and is crucial for the program’s longer-term success, is who will sign up. Will there be enough young, healthy enrollees to provide a favorable risk pool and keep premiums relatively low? Bear in mind that conservative groups have been spending heavily — and making some seriously creepy ads — in an effort to dissuade young people from signing up for insurance. Nonetheless, insurance companies are betting that young people will, in fact, sign up, as shown by the unexpectedly low premiums they’re offering...
And the insurers are probably right. To ... get a description of the typical person Obamacare needs to enroll, just take the description of a typical Tea Party member or Fox News viewer — older, affluent, white — and put a “not” in front of each characteristic. These are people the right-wing message machine is not set up to talk to, but who can be reached through many of the same channels, from ads on Spanish-language media to celebrity tweets, that turned out Obama voters last year. ... Enrollment is probably going to be just fine.
So Obamacare is off to a good start, with even the bad news being really good news for the program’s future. We’re not quite there yet, but more and more, it looks as if health reform is here to stay.
Creating a New Responsibility: Between the political posturing in Washington, and the excellent nuts-and-bolts reporting of the major news organizations, it is easy to lose sight of what is about happen on Tuesday.
When the Affordable Care Act takes effect, October 1, requiring most US citizens to obtain health insurance one way or another or pay a tax penalty for going without, a new obligation of citizenship will have been recognized by law.
The responsibility to take care of oneself will have been joined, however loosely, to the long-established right to emergency medical care.
Something like 25 million citizens, more than half of those who are currently uninsured, will enter into a relationship with a medical practice within the next few years. They’ll join more than 250 million Americans who are currently insured in the biggest undertaking to improve public health since the days of city sanitation and the war on communicable disease more than a century ago.
In many states, collective well-being will begin to improve almost immediately (the initial enrollment period extends through the end of March). In other states, especially those in the Southeast, where Republican governors have dug in against implementation of the law, a more complicated political game will play on. Everywhere, changes within the enormous health care sector, already underway, will gather momentum.
No wonder the fuss is so great...
On Tuesday the Affordable Care Act goes into effect. It was passed by the Congress and upheld by the Supreme Court. The White House holds all the cards. The Defunders, the operating arm of the Tea Party in Congress, are certain to lose if the president remains firm. He should simply state: you don’t negotiate with terrorists.
As if to underscore the point, Senator Tom Coburn (R-Oklahoma), a veteran of the government shutdowns of 1995-96, told Politico last week that if If the Republicans succeed in shutting down the government Tuesday, “they’ll fold like hotcakes” after a week or two, when constituents begin to complain about the lack of service. “You do not take a hostage you are not going to for sure shoot. And we will not for sure shoot this hostage.”
And in the longer term? My guess is that Tea Party dissidents will lose ground in the midterm elections next year; that the GOP will split in the 2016 campaign and that a Democrat will be elected president; that in 2018 the Tea Party will further fade. And by 2020, the Republican governors who are successful in implementing the Affordable Health Care Act will be running for president, strongly, on the strength of their records.
As we head for yet another political clash over government debt, one where Republicans are threatening a government shutdown and the health of the financial sector in an attempt to defund social insurance programs -- Obama care in particular -- a few things to keep in mind.
First, the long-run debt crisis is, and always was, primarily about health care costs.
Second, and importantly, it is a problem "driven in large part by increasing costs in the private-sector delivery of health care goods and services." That is, it is not a problem that is caused by the government or unique to government sponsored health care programs.
Third, the evidence suggests that Obamacare is reducing health care costs.
Fourth, the social safety net -- the very thing Republicans want to scale back substantially or eliminate -- played a key role in limiting the severity of the recession. Without these automatic stabilizers, things would have been even worse than they were.
The disinformation on the right -- the wonk gap -- is hurting the conservative cause:
The Wonk Gap, by Paul Krugman, Commentary, NY Times: On Saturday, Senator John Barrasso of Wyoming delivered the weekly Republican address. He ... demanded repeal of the Affordable Care Act ... and he predicted “sticker shock” in the months ahead. ...
Mr. Barrasso’s remarks were actually interesting, although not in the way he intended. You see, all the recent news on health costs has been good. So Mr. Barrasso is predicting sticker shock precisely when serious fears of such a shock are fading fast. Why would he do that? ...
Mr. Barrasso was inadvertently illustrating the widening “wonk gap” — the G.O.P.’s near-complete lack of expertise on anything substantive. Health care is the most prominent example...
For the truth is that the good news on costs just keeps coming in. There has been a striking slowdown in overall health costs since the Affordable Care Act was enacted... And ... on average premiums will be significantly lower than those predicted by the Congressional Budget Office...
But do Republican politicians know any of this? Not if they’re listening to conservative “experts,” who have been offering a steady stream of misinformation. ... How many Republicans know, for example, that government employment has declined, not risen, under President Obama? ...
For that, surely, is what the wonk gap is all about. Political conservatism and serious policy analysis can coexist, and there was a time when they did. Back in the 1980s, after all, health experts at Heritage made a good-faith effort to devise a plan for universal health coverage — and what they came up with was the system now known as Obamacare.
But that was then. Modern conservatism has become a sort of cult, very much given to conspiracy theorizing when confronted with inconvenient facts. Liberal policies were supposed to cause hyperinflation, so low measured inflation must reflect statistical fraud; the threat of climate change implies the need for public action, so global warming must be a gigantic scientific hoax. Oh, and Mitt Romney would have won if only he had been a real conservative.
It’s all kind of funny, in a way. Unfortunately, however, this runaway cult controls the House, which gives it immense destructive power — the power, for example, to wreak havoc on the economy by refusing to raise the debt ceiling. And it’s disturbing to realize that this power rests in the hands of men who, thanks to the wonk gap, quite literally have no idea what they’re doing.
Via Austin Frakt at The Incidental Economist, a chart showing the slowdown in the growth of Medicare spending:
Chart of the day: Medicare spending growth slowdown: From recent analysis by Michael Levine and Melinda Buntin of the CBO:
...To try to identify the causes of that slowdown, we performed a series of descriptive and statistical analyses based on a diverse array of data sources. However, those analyses did not yield an explanation for most of the slowdown in spending growth.
Fully 75% of the 3.2 percentage point difference between 2000-2005 and 2007-2012 per beneficiary spending growth cannot be explained by payment rate changes, beneficiary demand due to age and health status, Part A only enrollment, prescription drug use, the financial crisis and economic downturn, supplemental coverage.
Needless to say, this is a big and important mystery.
They Can’t Handle The Health Care Truth: Aaron Carroll talks about the Republican health care dilemma, and makes a good point: it runs deeper than the specific fact that Obamacare looks the way it does because it has to. At the most fundamental level, you can’t guarantee adequate health care to everyone unless the people who don’t need help right now — the young, healthy, and affluent — are induced, one way or another, to contribute to the care of those who do need help. You can do this purely with taxes, via a single-payer system (and maybe even by having the government act as provider), or you can do it, Swiss or Massachusetts style, via a combination of regulation, taxes, and subsidies. But some way of corralling the lucky healthy into contributing is necessary.
For the vast majority of this group, this is still a good deal — as Ezra Klein says, nobody stays young and healthy forever, and only a very small number of people are so rich that they are better off on a lifetime basis with no guarantee of insurance at all. But conservatives balk at the notion of any kind of redistribution, even if it makes almost everyone better off. So they are unable to come up with an alternative.
What they have are fantasies — claims that somehow unleashing the magic of the marketplace can make health care so cheap that everyone can afford it. There is absolutely no reason to believe that this is true. ...
Republican leaders who promised that Obamacare wouldn't work, and that it would be reversed, are headed for a big disappointment:
One Reform, Indivisible, by Paul Krugman, Commentary, NY Times: Recent political reporting suggests that Republican leaders are in a state of high anxiety, trapped between an angry base that still views Obamacare as the moral equivalent of slavery and the reality that health reform is the law of the land and is going to happen.
But those leaders don’t deserve any sympathy. For one thing, that irrational base is a Frankenstein monster of their own creation. Beyond that, everything I’ve seen indicates that members of the Republican elite still don’t get the basics of health reform — and that this lack of understanding is in the process of turning into a major political liability. ...
So let me help out by explaining, one more time, why Obamacare looks the way it does.
Start with the goal that almost everyone at least pretends to support: giving Americans with pre-existing medical conditions access to health insurance. Governments can ... require that insurance companies issue policies without regard to an individual’s medical history... But we know what happens next: many healthy people don’t buy insurance, leaving a relatively bad risk pool, leading to high premiums that drive out even more healthy people.
To avoid this downward spiral, you need to induce healthy Americans to buy in; hence, the individual mandate, with a penalty for those who don’t purchase insurance. Finally, since buying insurance could be a hardship for lower-income Americans, you need subsidies to make insurance affordable for all.
So there you have it: health reform is a three-legged stool resting on community rating, individual mandates and subsidies. It requires all three legs. ...
You see, this thing isn’t going to be the often-predicted “train wreck.” On the contrary, it’s going to work.
Oh, there will be problems... But the basic thrust of Obamacare is, as I’ve just explained, coherent and even fairly simple. Moreover, all the early indications are that the law will, in fact, give millions of Americans who currently lack access to health insurance the coverage they need, while giving millions more a big break in their health care costs. And because so many people will see clear benefits, health reform will prove irreversible.
This achievement will represent a huge defeat for the conservative agenda of weakening the safety net. And Republicans who deluded their supporters into believing that none of this would happen will probably pay a large personal price. But as I said, they have nobody but themselves to blame.
Death Panels in Oregon, by Aaron Carroll: The WSJ editorial page is back today, with warnings of DEATH PANELS! in Oregon...
The piece then goes on to rail against Medicaid, and HERC, for trying to limit what Medicaid will cover.
First of all, I’m always a bit confused by the fact that it’s often the same people, and organizations, who rail against rationing within Medicaid while simultaneously railing against the Medicaid expansion. Evidently, they are fine with completely denying Medicaid to many of the poorest among us, but against making Medicaid less robust once they get it. Odd.
But my larger concern is one of philosophy. We simply cannot afford to pay for everything. ... And so, there will at some point have to be discussions as to what we might not pay for. ...[discusses the actual HERC document and the recommendations of the committee] ...
I wish we never had to have these discussions. I really do. But at some point, we probably should think in terms of prioritizing therapies. This isn’t the worst way to do it, and at least it’s in public.
I’d like to make a larger point. Although the editorial makes the case that this is the left’s one-size-fits all approach, that’s just not true. This is a discussion of Medicaid, not of Medicare, and not of private insurance (which also refuses to cover things, about which the WSJ doesn’t seem concerned). No one is prohibited from spending their own money on futile care. No one is prohibited from buying an insurance policy that will continue to cover futile care. What’s being discussed is how we will use taxpayer money to cover those at the lowest end of the socioeconomic spectrum. Recognize that anyone that qualifies for Medicaid will not be able to pay out of pocket for these services. Recognize that they will never be able to afford private insurance that covers these services. Recognize that we will never approve subsidies that will allow them to cover the services or private insurance that does. So either the government does, or no one does.
Have that debate. Have it in public. Have it civilly. But please don’t pretend to be outraged by that serious discussion while simultaneously being ok with denying much more to many more in the name of “fiscal responsibility”.
...all those extra costs for the uninsured drove up premiums for everyone else, drove up hospital costs, giving them a reason to raise prices even further, and played a role in rendering healthcare unaffordable for many others.
What Obamacare does, like Romneycare before it, is end this free-loading.
The law is telling these young adults that if you want to go without insurance, you are not going to make everyone else pay for it if your risk-analysis ends up faulty. You have to exercise a minimum of personal responsibility to pay for your own potential healthcare. In other words, rights come with responsibilities in a liberal democracy. At least that is what I always understood the conservative position to be.
So why is an allegedly conservative organization actively encouraging personal irresponsibility? Why are they encouraging one sector of society – the young and the fearless – to rely on everyone else’s sacrifice to get bailed out if they have an accident, or contract cancer, or need a hospital to deliver a baby? This is not freedom as the Founders understood it; it’s recklessness, irresponsibility and short-sighted selfishness. Now, if the twentysomethings cannot afford it, it’s one thing – and part of our healthcare cost crisis. But now that Obamacare has removed that excuse and demands that every citizen actually contribute to the insurance pool, that completely defensible excuse is over. No more free-loading, in other words.
So I ask again: why is free-loading now a conservative value? ...
Social Security is similar. If people weren't required to contribute, many wouldn't (if for no other reason than the immediate financial demands for many families make it hard to save). But we, as a society, wouldn't let them starve and die when they are no longer able to work, and the rest of us would end up footing the bill. So we require people to contribute to their own retirement through withholding for Social Security. Like health insurance for the young, many people don't need Social Security to retire comfortably, but for those who do it's a lifesaver, one that is at least partially funded through their own contributions.
For Obamacare to Work, Everyone Must Be In, by Robert Frank, Commentary, NY Times: Two beliefs continue to shape debate on Obamacare. First, pre-existing medical conditions shouldn’t prevent people from obtaining affordable health insurance. And second, people who don’t want health insurance shouldn’t be forced by the government to purchase it.
These may seem to be reasonable positions. But they are incompatible. That’s been shown by historical events, and it’s now being strikingly confirmed by recent experience in the emerging Obamacare insurance exchanges.
The crux of the matter is what economists call the adverse-selection problem. ...
We must ask those who would repeal Obamacare how they propose to solve the adverse-selection problem. That problem is not an abstraction invented by economists to justify trampling individual liberties. As experience in most countries around the world has confirmed, it is a profound source of market failure that renders unregulated insurance markets a catastrophically ineffective way of providing access to health care.
This was in today's links, but it's worth highlighting:
Howard Dean Sells Out: Monday Health Care Lobbyist Smackdown Weblogging, by Brad DeLong: The government already sets rates for Medicare, through the RVS and the RUC process.
The Independent Payment Advisory Board--IPAB--is an attempt to set rates in a less-stupid and more evidence-based way.
Thus Howard Dean claiming that "the ACA's rate-setting won't work", thereby telling his readers that the creation of IPAB introduces rate-setting into some equilibrium of free-market prices for Medicare, is Howard Dean being mendacious to try to protect the profits of the clients of McKenna, Long, & Aldridge. It is not Howard Dean weighing in on public policy trying to make America a better place.
Shame on Howard Dean. Disgraceful. ...
The beginning of health inequality:
Inequality of Opportunity Begins at Birth, by Bill Gardner: Equality of opportunity means that we are not a caste society. Who we will become is not fixed by the circumstances of our births. Some children will do better than others, but this should result from a fair competition. ...
But we don’t appreciate how deep inequality runs. The graph below is from a presentation by Angus Deaton which (I believe) reported data from the National Health Interview Survey. The horizontal axis is the logarithm of family income in 1982 dollars, running from about $3600 to over $80,000. The vertical axis is self-reported ill-health (higher numbers reflect worse health). The parallel lines represent different age groups of respondents.
There are three important facts packed into this slide. First, the lines stack up in order of increasing age, meaning that older people reported worse health than younger people. Second, all the lines slope downward, meaning that the poorer you were, the more likely you had poor health. ...
Lastly, notice how the age lines are much more dispersed on the left (poorest) side of the graph than the right (richest) side of the graph. This means that health deteriorates more quickly with age among the poor than among the rich.
...there is substantial evidence that health inequality starts at birth, or even conception. As Janet Currie argues, there is
huge inequality in health at birth. For example, the incidence of low birth weight (birth weight less than 2500 grams) is more than three times higher among children of black high school dropout mothers than among children of white college educated mothers.
...the infants of the poor are also at risk because poor mothers have poorer health, are more stressed, and are more likely to be exposed to environmental toxins. Poverty gets underneath the skin, starting in the uterus.
Poor health deriving from inequality of economic well-being begins at birth and accumulates as children develop. We are farther from equality of opportunity than most of us acknowledge.
The success of Obamacare is driving Republicans to yet another round of potentially damaging brinsmanship:
Republican Health Care Panic, by Paul Krugman, Commentary, NY Times: Leading Republicans appear to be nerving themselves up for another round of attempted fiscal blackmail. With the end of the fiscal year looming, they aren’t offering the kinds of compromises that might produce a deal and avoid a government shutdown; instead, they’re drafting extremist legislation ... that has no chance of becoming law. Furthermore, they’re threatening, once again, to block any rise in the debt ceiling, a move that would damage the U.S. economy and possibly provoke a world financial crisis.
Yet even as Republican politicians seem ready to go on the offensive, there’s a palpable sense of anxiety, even despair, among conservative pundits and analysts. Better-informed people on the right seem, finally, to be facing up to a horrible truth: Health care reform, President Obama’s signature policy achievement, is probably going to work.
And the good news about Obamacare is, I’d argue, what’s driving the Republican Party’s intensified extremism. Successful health reform wouldn’t just be a victory for a president conservatives loathe, it would be an object demonstration of the falseness of right-wing ideology. So Republicans are being driven into a last, desperate effort to head this thing off at the pass. ...
Over all,... health reform will help millions of Americans who were previously either too sick or too poor to get the coverage they needed, and also offer a great deal of reassurance to millions more...; it will provide these benefits at the expense of a much smaller number of other Americans, mostly the very well off. ...
And the prospect that such a plan might succeed is anathema to a party whose whole philosophy is built around doing just the opposite, of taking from the “takers” and giving to the “job creators,” known to the rest of us as the “rich.” Hence the brinkmanship.
So will Republicans actually take us to the brink? If they do, it will be crucial to understand why they would do such a thing, when their own leaders have admitted that confrontations over the budget inflict substantial harm on the economy. It won’t be because they fear the budget deficit, which is coming down fast. Nor will it be because they sincerely believe that spending cuts produce prosperity.
No, Republicans may be willing to risk economic and financial crisis solely in order to deny essential health care and financial security to millions of their fellow Americans. Let’s hear it for their noble cause!
Aaron Carroll highlights a new "ridiculously fantastic manuscript" on the state of US health:
The state of US health ain’t so good: There’s a ridiculously fantastic manuscript over at JAMA that you should go read right now. “The State of US Health, 1990-2010: Burden of Diseases, Injuries, and Risk Factors“: ... This study specifically looked at the burden of disease, injuries, and risk factors in the US versus other countries. The methods are amazingly detailed.
So how did we do compared to other countries? Not well. Between 1990 and 2010, among the 34 countries in the OECD, the US dropped from 18th to 27th in age-standardized death rate. The US dropped from 23rd to 28th for age-standardized years of life lost. It dropped from 20th to 27th in life expectancy at birth. It dropped from 14th to 26th for healthy life expectancy. The only bit of good news was that the US only dropped from 5th to 6th in years lived with disability.
There’s a chart I’d like to highlight. This is the rank of age-standardized years of life lost rates among the 34 OECD countries in 2010. The numbers in each cell show the rank of the country in years of life lost for each cause (1 is best). The countries are sorted overall on age-standardized all-cause years of life lost. The colors show if the age-standardized years of life lost for a country is significantly lower than the mean (green), indistinguishable from the mean (yellow), or higher than the mean (red) for all OECD countries (click to enlarge):
Things don’t look so good for the US. There’s an awful lot of red there. A little bit of yellow. One green. Best in the world, my ass.
Some of you will feel the urge to blame this on the racial or ethnic makeup of the US. I encourage you to look at the variety of causes of years of life lost. They don’t favor just one group. They’re all over the place. And we do pretty badly in most of them. ...
I want to highlight one more table. It’s the deaths and years of life lost for the 30 leading diseases and injuries that contribute to overall years of life lost in the United States in 1990 and 2010. They’re ranked by the size of the relative contribution to overall years of life lost. In other words, those at the top cause the most years of life lost in the US, and those at the bottom the least...
What we have here is a prioritization issue. We spend a lot of time worrying about colon cancer. It’s ranked 11th in 2010. We spend a lot of time worrying about breast cancer. We have walks, and ribbons, and whole months dedicated to it. It’s ranked 13th. Prostate Cancer? Men are obsessed with it. It’s ranked 27th. But more years of life are lost to lung cancer than to prostate cancer, colon cancer, and breast cancer combined. Ischemic heart disease causes four times as many years of life to be lost each year as prostate cancer, colon cancer, and breast cancer combined. Stroke is 3rd. COPD is 4th. Traffic accidents are 5th. Suicide is 6th. None of these things get the national attention, or resources, that they deserve.
We could have the best health care system in the world. We’ve got the money and the necessary pieces to get really, really good outcomes. But we need to be much smarter about it if we’re going to do so.
As I sit in the Houston airport waiting for a connection, a quick one from Jared Bernstein:
Putting Off the Employer Mandate: Well, I didn’t see that coming. The Obama administration announced Tuesday afternoon that it was going to delay an important part of the Affordable Care Act for one year. The rule requiring employers with at least 50 full-time workers to provide them with coverage or pay a penalty (also known as the employer mandate) will now be enforced starting in 2015, not 2014 as originally planned.
Here’s a very brief look at why, what, and what it means. ...
Though the mandate will ultimately affect only a few employers, it is actually an important piece of the law’s architecture. Without it, employers who currently provide coverage to their workers could drop the coverage and send their workers over to the state health care exchanges..., the employer would be shifting what is now a private cost over to the government.
The penalty for such actions was supposed to kick in next year; now they’ll kick in the year after next. ...
How will this affect coverage? Hard to see it having much impact at all. ...
So... Is this delay just not a big deal? Um … this is Washington, folks, and we’re talking Obamacare. There will be much hay made of this delay in coming days. Conservatives will argue that this confirms that the law is unmanageable — which is a bit rich, since many of them have been trying to kill it, block it, and stop it in its tracks. ... Liberals may argue that the administration is caving to business, which just wants to put off the paperwork for a year.
I think it’s an unfortunate delay of an important but relatively small piece of the bill... But that’s not how it will play in the hurly-burly of the next few days of Washington politics.
I am hosting a Firedoglake Book Salon later today:
The book is The Body Economic: Why Austerity Kills by David Stuckler and Sanjay Basu.
What Sweden Can Tell Us About Obamacare, by Robert Frank, Commentary, NY Times: Last month, for the 37th time, the House of Representatives voted to repeal Obamacare, with many Republicans saying that its call for greater government involvement in the health care system spells doom. Yet most other industrial countries have health care systems with far more government involvement than we are ever likely to see under Obamacare. What does their experience tell us about Republican fears?
While in Sweden this month as a visiting scholar, I’ve asked several Swedish health economists to share their thoughts about that question. They have spent their lives under a system in which most health care providers work directly for the government. Like economists in most other countries, they tend to be skeptical of large bureaucracies. ...
Yet none of them voiced ... complaints about recalcitrant bureaucrats... Little wonder. The Swedish system performs superbly, and my Swedish colleagues cited evidence of that fact with obvious pride. ...
Congressional critics must abandon their futile efforts to repeal Obamacare and focus instead on improving it. Their core premise — that greater government involvement in health care provision spells disaster — lacks support in the wealth of evidence from around the world that bears on it.
The truth appears closer to the reverse: Because of pervasive market failures in private health care markets, this may be the sector that benefits most from collective action.
Insurance Tyranny: Many of us wish that Obamacare were a simpler system... Political reality, unfortunately, ensured that many people will receive coverage from private insurers, selling policies — often with subsidies — on the "exchanges". And naturally enough, the Obama administration is teaming up with the insurers... to help inform Americans of the benefits to which they will be legally entitled, starting Jan. 1.
And in the eyes of Republicans, Bloomberg reports, this makes Obama a “bully” — dragooning those private companies into helping sell a public program that will increase their profits. Why, it’s tyranny, I tell you!
Yes, it’s ridiculous. But they can’t help themselves. I suspect that the idea of helping lower-income Americans in any way would drive the GOP bonkers; but the idea that this help might come from Obama (implementing a program originally designed by Republicans, but never mind), and that Obama’s plan might actually work, drives them crazy.
Why are many Republican-dominated states opting out of Obamacare's federally financed expansion of Medicaid?:
The Spite Club, by Paul Krugman, Commentary, NY Times: House Republicans have voted 37 times to repeal ObamaRomneyCare... Nonetheless, almost all of the act will go fully into effect at the beginning of next year.
There is, however, one form of obstruction still available to the G.O.P. Last year’s Supreme Court decision upholding the law’s constitutionality also gave states the right to opt out of one piece of the plan, a federally financed expansion of Medicaid. Sure enough, a number of Republican-dominated states seem set to reject Medicaid expansion, at least at first.
And why would they do this? ... The ... only way to understand the refusal to expand Medicaid is as an act of sheer spite. And the cost of that spite won’t just come in the form of lost dollars; it will also come in the form of gratuitous hardship for some of our most vulnerable citizens. ...
A new study from the RAND Corporation ... examines the consequences if 14 states whose governors have declared their opposition to Medicaid expansion do, in fact, reject the expansion. The result ... would be a huge financial hit: the rejectionist states would lose more than $8 billion a year in federal aid, and would also find themselves on the hook for roughly $1 billion more to cover the losses hospitals incur when treating the uninsured.
Meanwhile, Medicaid rejectionism will deny health coverage to roughly 3.6 million Americans, with essentially all of the victims living near or below the poverty line. And since past experience shows that Medicaid expansion is associated with significant declines in mortality, this would mean a lot of avoidable deaths: about 19,000 a year, the study estimated.
Just think about this... It’s one thing when politicians refuse to spend money helping the poor and vulnerable; that’s just business as usual. But here we have a case in which politicians are, in effect, spending large sums, in the form of rejected aid, not to help the poor but to hurt them.
And ... it doesn’t even make sense as cynical politics. ... What it might do ... is drive home to lower-income voters — many of them nonwhite — just how little the G.O.P. cares about their well-being, and reinforce the already strong Democratic advantage among Latinos, in particular.
Rationally, in other words, Republicans should accept defeat on health care, at least for now, and move on. Instead, however, their spitefulness appears to override all other considerations. And millions of Americans will pay the price.
What does the new evidence on Obamacare tell us?:
The Obamacare Shock, by Paul Krugman, Commentary, NY Times: Obamacare goes fully into effect at the beginning of next year, and predictions of disaster are being heard far and wide. There will be an administrative “train wreck,” we’re told; consumers will face a terrible shock. Republicans, one hears, are already counting on the law’s troubles to give them a big electoral advantage.
No doubt there will be problems, as there are with any large new government initiative, and ... we have the added complication that many Republican governors and legislators are doing all they can to sabotage reform. Yet important new evidence — especially from California... — suggests that the real Obamacare shock will be one of unexpected success. ...
In ... California..., insurers have submitted the prices at which they are willing to offer coverage on the state’s newly created Obamacare exchange. And the prices ... are surprisingly low..., it looks as if Obamacare’s first year in California is going to be an overwhelmingly positive experience.
What can still go wrong? Well, Obamacare is a complicated program, basically because simpler options, like Medicare for all, weren’t considered politically feasible. So there will probably be ... administrative confusion as the law goes into effect, again especially in states where Republicans have been doing their best to sabotage the process.
Also, some people are too poor to afford coverage even with the subsidies. These Americans were supposed to be covered by a federally financed expansion of Medicaid, but in states where Republicans have blocked Medicaid expansion, such unfortunates will be left out in the cold.
Still, here’s what it seems is about to happen: millions of Americans will suddenly gain health coverage, and millions more will feel much more secure knowing that such coverage is available if they lose their jobs or suffer other misfortunes. Only a relative handful of people will be hurt at all. And as contrasts emerge between the experience of states like California that are making the most of the new policy and that of states like Texas whose politicians are doing their best to undermine it, the sheer meanspiritedness of the Obamacare opponents will become ever more obvious.
So yes, it does look as if there’s an Obamacare shock coming: the shock of learning that a public program designed to help a lot of people can, strange to say, end up helping a lot of people — especially when government officials actually try to make it work.
Jon Chait notes some bad news for deficit hawks and opponents of Obamacare:
Give Back that Pulitzer, Wall Street Journal Editorial Page: The recent slowdown in health-care costs is one of those facts, like climate change or the rapid growth after Bill Clinton raised taxes, that flummoxes American conservatism. The slowdown of health-care costs is one of the most important developments in American politics. The long-term deficit crisis — those scary charts Paul Ryan likes to hold up, with federal spending soaring to absurd levels in a grim socialist dystopian future — all assume the cost of health care will continue to rise faster than the cost of other things. If that changes, the entire premise of the American debate changes. And there’s a lot of evidence to suggest it is changing — health-care costs have slowed dramatically, and experts believe it’s happening for non-temporary reasons.
The general conservative response to date has involved ignoring the trend, or perhaps dismissing it as a temporary, recession-induced dip... Yesterday, the Wall Street Journal editorial page offered up what may be the new conservative fallback position: Okay, health-care costs are slowing down, but it has absolutely nothing to do with the huge new health-care reform law. “It increasingly looks as if ObamaCare passed amid a national correction in the health markets,” the Journal now asserts, “that no one in Congress or the White House understood.” It’s another one of those huge, crazy coincidences!
Of course, it’s not just that the Journal didn’t predict the health-care cost slowdown. The Journal insisted ... that Obamacare would ... necessarily lead to a massive increase in health-care inflation. In a series of hysterical, freedom-at-dusk editorials which were, unbelievably, awarded a Pulitzer Prize for commentary, the Journal expounded extensively on this belief. ...
The ... fact that the right is being forced to fall back from predicting a staggering rise in health-care costs to explaining away the staggering decline in health-care costs represents real progress...
More bad news for deficit hawks from the CBO. Ezra Klein explains:
CBO says deficit problem is solved for the next 10 years: ...according to the Congressional Budget Office, the debt disaster that has obsessed the political class for the last three years is pretty much solved, at least for the next 10 years or so.
The last time the CBO estimated our future deficits was February– just four short months ago. Back then, the CBO thought deficits were falling and health-care costs were slowing. Today, the CBO thinks deficits are falling even faster and health-care costs are slowing by even more.
Here’s the short version: Washington’s most powerful budget nerds have cut their prediction for 2013 deficits by more than $200 billion. They’ve cut their projections for our deficits over the next decade by more than $600 billion. Add it all up and our 10-year deficits are looking downright manageable. ...
To Fight Pandemics, Reward Research, by Tyler Cowen, Commentary, NY Times: That frightening word “pandemic” is back in the news. A strain of avian influenza has infected people in China... The outbreak raises renewed questions about how to prepare for possible risks...
Our current health care policies are not optimal for dealing with pandemics. The central problem is that these policies neglect ... “public goods”: items and services that benefit many people and can’t easily be withheld from those who don’t pay for them directly.
Protection against communicable diseases is a core example of a public good, as is basic scientific research... Without government financing for such public goods, the capacity wouldn’t be there if a new pandemic produced a surge in demand. This would amount to an institutional failure.
The government could also take another, more unusual step: it could promise to pay lucrative prices for the patents on drugs and vaccines that prove useful in dealing with pandemics. ...
Over all, the American government seems to be turning its back on its traditional role of producing and investing in national public goods. ... Focusing government on the production of public goods may sound like a trivial issue... But, in fact, we have been failing at it, and the consequences could be serious indeed.
[This extract probably doesn't emphasize the idea in the second to last paragraph above -- offering prizes for ideas that prove useful in dealing with pandemics -- as much as Tyler would prefer.]
Following up on Brad DeLong's theme today, more on the Oregon Medicaid experiment (and whether expansion of Medicaid is a good idea -- DeLong has a more cautionary but ultimately positive take on the results -- Krugman comments here):
How Medicaid affects adult health, MIT News: Enrollment in Medicaid helps lower-income Americans overcome depression, get proper treatment for diabetes, and avoid catastrophic medical bills, but does not appear to reduce the prevalence of diabetes, high blood pressure and high cholesterol, according to a new study with a unique approach to analyzing one of America’s major health-insurance programs.
The study, a randomized evaluation comparing health outcomes among more than 12,000 people in Oregon, employs the same research approach as a clinical trial, but applies it in a way that provides a window into the health outcomes of poor Americans who have been given the opportunity to get health insurance.
“What we found was that Medicaid significantly increased the probability of being diagnosed with diabetes, and being on diabetes medication,” says Amy Finkelstein, the Ford Professor of Economics at MIT and, along with Katherine Baicker of Harvard University’s School of Public Health, the principal investigator for the study. “We find decreases in rates of depression, and we continue to find reduced financial hardship. However, we were unable to detect a decline in the incidence of diabetes, high blood pressure, or high cholesterol.”
A paper based on the study, “The Oregon Experiment — Medicaid’s Effects on Clinical Outcomes,” is being published today in the New England Journal of Medicine.
The findings bear on the expansion of the federal government’s Affordable Care Act (ACA), currently being phased in across the nation. The ACA provides funding for states to expand Medicaid coverage to low-income adults who are currently not part of the program.
Winning the lottery
The researchers analyzed the impact that Medicaid had on people over a two-year span. Among other things, they found about a 30 percent decline in the rate of depression among people on Medicaid; an increase in people being diagnosed with, and treated for, diabetes; and increases in doctor visits, use of preventative care, and prescription drugs. They also found that Medicaid reduced, by about 80 percent, the chance of a person having catastrophic out-of-pocket medical expenses, defined as spending 30 percent of one’s annual income on health care.
“That’s important, because from an economics point of view, the purpose of health insurance is to … protect you financially,” Finkelstein says.
The researchers did not find any change in three other health measures: blood pressure, cholesterol, or a blood test for diabetes. But the data does provide important indicators about the ways newly-insured people are using medical services.
“There was a big increase in the use of preventative medicine,” says Baicker, noting that Medicaid increased the use of services such as mammograms and cholesterol screening, as well as increasing doctor's office visits and prescription drugs.
Other health researchers say these findings correspond with a developing picture of how increased medical care addresses different kinds of problems over different spans of time.
“I would expect a more immediate impact when it comes to measures of mental health and emotional well-being, including depression,” says Thomas McDade, an anthropologist at Northwestern University and director of its Laboratory of Human Biology Research, who studies public-health issues. “Things like risk for cardiovascular disease, your lipid concentrations, your blood pressure, these are things that are really established over a lifetime of exposure to diet, physical activity, and psychosocial environment, so we don’t expect them to move as quickly.”
The study uses data from a unique program the state of Oregon founded in 2008, after officials realized they had Medicaid funds for about 10,000 additional uninsured residents. The state created a lottery system to fill those 10,000 slots; about 90,000 residents applied.
That lottery thus generated a group of residents gaining Medicaid coverage who were otherwise similar to the applicants still lacking coverage. Using this divide, the researchers compared to a control group of 6,387 people who signed up for the lottery and were selected to 5,842 people who applied for Medicaid but were not selected to enroll.
“We recognized the lottery as a literally once-in-a-lifetime opportunity to bring the rigors of a randomized controlled trial, which is the gold standard in medical and scientific research, to one of the most pressing social policy questions of our day, namely, the consequences of covering the uninsured,” Finkelstein says.
Or as Baicker puts it, “We would never accept a medical trial that didn’t have a control group.”
In particular, this kind of study, by matching two like groups of people, eliminates one longstanding problem in studying health insurance: that people in worse health may seek out health insurance more often than those in good health do, thus making it appear, at a glance, that having health insurance does not help improve medical outcomes.
“The whole tension with studying the effects of insurance is, you have to wonder why some people have insurance and other people don’t, and whether those reasons could be related to the outcomes you’re studying,” Finkelstein explains, “like the possibility that people who are sicker seek out insurance more. So you can get perverse results [on the surface], indicating that health insurance makes you sicker, not because it actually does, but because of the kinds of people who are seeking it out.”
As McDade also notes, “It’s a true experiment, and these kinds of opportunities do not come along very often.” ...
I'm still digesting exactly what this means for health care policy, but if the growth in health care costs is being "driven by the number of treated enrollees as opposed to the cost of treatment," is that a problem?:
What’s Driving Medical-Care Spending Growth?, by Adam Hale Shapiro, FRBSF Economic Letter: The United States spends more per capita on health care than any other developed country. In 2010, health care accounted for more than 17% of gross domestic product (GDP), more than double the average of other developed countries. In addition, the pace of health-care spending growth has been rapid, outpacing overall GDP growth. The Centers for Medicare and Medicaid Services (CMS) projects that, by 2020, health-care spending will total $4.64 trillion, representing approximately 20% of GDP (Keehan et al. 2011). Understanding the source of this growth is essential to control costs, or “bend the cost curve,” without sacrificing access to care or quality.
This Economic Letter summarizes recent research (Dunn, Liebman, and Shapiro 2012a, b, c) that pinpoints the distinct sources of medical-care spending growth in the employer-sponsored and private health insurance market. The privately insured health-care market is economically important. Total spending for employer-sponsored private health insurance was $709 billion in 2011 (Gaynor and Newman 2012), which was approximately 30% more than Medicare outlays that year. Unlike the Medicare market in which CMS fixes payments to providers, private-sector prices are set through negotiations between insurers and providers. As a result, those prices are sensitive to competitive factors. Thus, spending growth in the privately insured market can stem from a multitude of sources, including growth in negotiated services prices. ...
An analysis of the components of medical-care expenditures indicates that spending growth in the privately insured market is being driven by the number of treated enrollees as opposed to the cost of treatment. In fact, patterns of utilization of medical services held spending growth in check. This is most evident for cardiology conditions, in which the quantity of services per episode of care declined sizably over the sample period.
Thus, “bending the cost curve” does not necessarily imply reducing growth in the cost of treatment. Rather, it may also imply slowing the growth in the number of enrollees receiving medical treatment. Treatment growth is most pronounced for preventive care. But we are skeptical that holding down growth in this area would be beneficial. In fact, a higher percentage of enrollees receiving preventive treatment may lead to lower expenditures in the future, better health outcomes, or both. Ultimately, more research is needed to determine which forms of spending growth are wasteful and which are productive in terms of health outcomes.
A shift from inpatient to outpatient services has caused utilization of services for certain conditions to decline. At the same time though, some areas, such as cancer treatment, have seen growth in both service utilization and prices. In the case of cancer, we hypothesize that cost growth reflects extensive innovation in treating malignancies. A more comprehensive study of cancer treatment would lead to a better understanding of the rising costs in this area.