Economist's View

Bad News for Deficit Hawks and Opponents of Obamacare

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. ...

Cowen: To Fight Pandemics, Reward Research

Tyler Cowen:

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.]

How Medicaid Affects Adult Health

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.” ...

'What’s Driving Medical-Care Spending Growth?'

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. ...

Conclusion

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.

'Big Health Insurance Rate Hikes are Plummeting'

Some evidence that Obamacare is reducing the rate of increase in the cost of health insurance:

Big health insurance rate hikes are plummeting, by Sarah Kliff: The number of double-digit rate increases requested by health insurers has plummeted over the past four years, according to a Friday report from the Obama administration.

Researchers combed through data available from the 15 states that publicly post all requests for rate increases in the individual market. They found that, in 2009, 74 percent of all requests came in above 10 percent. By 2012, that number had fallen to 35 percent. Preliminary data for 2013, which only cover a handful of states, shows 14 percent of rate increases asking for a double-digit bump. Here’s what this looks like in chart form:

Does Obamacare get credit? The administration thinks so...

One other possible explanation: Over this time period, there has also been a big slowdown in the rate of health care cost growth. That began in 2009, so it’s not completely impossible that the health insurance industry, noticing that trend, began pricing individual market products at lower rates.

The administration has considered that idea though and looked at the large group market to test it. If the health cost slowdown really was driving lower premiums, the thinking went, it would show up across all insurance products. It didn’t...

Speaking of Obamacare, from Brad DeLong: Douglas Holtz-Eakin and Avik Roy: "You Know All That Stuff We Have Been Saying for Four Years? Nevermind!", and from Paul Krugman: More Swiss Myths.

'Setting the Record Straight on Medicare's Overhead Costs'

I don't know much about the quality of the journal where this research appears, but it's still worth noting:

Setting the record straight on Medicare's overhead costs, EurekAlert: ...The traditional Medicare program allocates only 1 percent of total spending to overhead compared with 6 percent when the privatized portion of Medicare, known as Medicare Advantage, is included, according to a study in the June 2013 issue of the Journal of Health Politics, Policy and Law.

The 1 percent figure ... is based on data contained in the latest report of the Medicare trustees. The 6 percent figure, on the other hand, is based on data contained in the latest National Health Expenditure Accounts (NHEA) report.  ...

According to ... [Minneapolis-based researcher Kip Sullivan, there is] confusion about Medicare's overhead costs. "The confusion is due partly to the existence of two government reports," says Sullivan, "and partly to claims by critics of Medicare that the government fails to report all of Medicare's overhead costs." The paper addresses both sources of confusion. The article explains the difference between the yardstick used by the trustees and the one used by the NHEA and concludes both are accurate. ...

The 1 percent figure is the one that should be used to analyze several hotly debated health reform issues, including whether to expand traditional Medicare to all Americans and whether to turn Medicare over to the insurance industry, either by expanding the Medicare Advantage program of by converting Medicare to a voucher program as Rep. Paul Ryan has proposed. ... The average overhead of the health insurance industry is approximately 20 percent, he said.

The large difference between traditional Medicare's overhead and that of the insurance industry has caused some conservative critics of Medicare to assert that the federal government is ignoring numerous administrative expenditures incurred by various federal agencies that should be attributed to Medicare.

Sullivan's paper ... describes this criticism as the second major source of confusion about Medicare's overhead. Sullivan's study reports that the 1 percent figure includes all appropriate administrative expenses incurred on Medicare's behalf, including those by the IRS, the Social Security Administration, and the FBI, as well as the cost of numerous pilot projects that Congress orders CMS to conduct. ...

Good News on Health Care Costs and the Budget

The biggest driver of the "we must cut the national debt now, now, now" is the expectation that the cost of medical services (and hence the cost of Medicare) will escalate rapidly. But that argument is being undercut by new estimates from the CBO:

Here’s some good news on the fiscal front: projected Medicare spending over the 2011-2020 period has fallen by more than $500 billion since late 2010 — based on a comparison of the latest Congressional Budget Office (CBO) projections with those of August 2010. ...

CBO has reduced its projections of Medicare spending in response to a pattern of very low spending growth in the past three years. ... Medicare spending growth has slowed even more than costs in private health insurance, according to Standard & Poor’s and Medicare’s actuary. Although some of the slowdown stems from the recession, CBO Director Douglas Elmendorf and other experts have concluded that a substantial part reflects structural changes in the health care system. Professional associations, hospitals, and doctors are taking steps to curb costly and ineffective procedures and treatment. ...

The deficit hawks want to hurry and cut spending now. Their goal, after all, is smaller government and lower taxes on the wealthy needed to support it. Thus, they need to get the cuts in place before people figure out that they've been misled about the immediacy of the problem -- the scary projections are down the road, not tomorrow -- and that the problem is not as big as we thought.

(And who the hell cares what Bowles and Simpson think? I certainly don't. But apparently someone cares, because even though they couldn't get the committee they headed to agree on their previous budget plan, the unofficial plan they released was treated as official by the media. Now they are back in the news again with a another plan -- sanctioned by nothing but their own egos -- that tries to move the budget discussions more in the direction of what the GOP desires. Please just go away.)

Paul Krugman: The Big Deal

Progressives should cheer up:

The Big Deal, by Paul Krugman, Commentary, NY Times: On the day President Obama signed the Affordable Care Act into law, an exuberant Vice President Biden famously pronounced the reform a “big something deal” — except that he didn’t use the word “something.” And he was right..., if progressives look at where we are as the second term begins, they’ll find grounds for a lot of (qualified) satisfaction.

Consider, in particular, three areas: health care, inequality and financial reform.

Health reform is, as Mr. Biden suggested, the centerpiece of the Big Deal. Progressives have been trying to get some form of universal health insurance since the days of Harry Truman; they’ve finally succeeded. …

What about inequality? ... Like F.D.R., Mr. Obama took office in a nation marked by huge disparities in income and wealth. But where the New Deal had a revolutionary impact, empowering workers and creating a middle-class society that lasted for 40 years, the Big Deal has been limited to equalizing policies at the margin.

That said,... through new taxes ... 1-percenters will see their after-tax income fall around 6 percent... This will reverse only a fraction of the huge upward redistribution that has taken place since 1980, but it’s not trivial.

Finally, there’s financial reform. The Dodd-Frank reform bill is ... not the kind of dramatic regime change one might have hoped for… Still, if plutocratic rage is any indication, the reform isn’t as toothless as all that. …

All in all, then, the Big Deal has been, well, a pretty big deal. But will its achievements last? ... I ... think so. For one thing, the Big Deal’s main policy initiatives are already law. ... And ... the Big Deal agenda is, in fact, fairly popular — and will become more popular once Obamacare goes into effect...

Finally, progressives have the demographic and cultural wind at their backs. Right-wingers flourished for decades by exploiting racial and social divisions — but that strategy has now turned against them...

Now, none of what I’ve just said should be taken as grounds for progressive complacency. The plutocrats may have lost a round, but their wealth and the influence it gives them in a money-driven political system remain. Meanwhile, the deficit scolds (largely financed by those same plutocrats) are still trying to bully Mr. Obama into slashing social programs. ...

Still, maybe progressives — an ever-worried group — might want to take a brief break from anxiety and savor their real, if limited, victories.

'Health Care Rationing Is Nothing New'

On health care rationing in the US:

Health Care Rationing Is Nothing New [Excerpt], by Beatrix Hoffman: ... Opponents of the 2010 Patient Protection and Affordable Care Act warn that the new health care law will lead to rationing, or limits on medical services. But many observers point out that health care is already rationed in the United States. "We've done it for years," said Dr. Arthur Kellermann, professor of emergency medicine and associate dean for health policy at Emory University School of Medicine. "In this country, we mainly ration on the ability to pay." ...

Countries with universal health systems ration health care via controlled distribution, whether through national budgeting, government setting of prices and provider fees, restrictions on some services, or a combination of methods. The United States health care system rations primarily by price and insurance coverage—and ... many other methods as well. Americans have learned to fear European or Canadian types of rationing, but don't see that the United States practices both price rationing and other types of rationing in health care.

Rationing in the United States is ... practiced by government agencies, private health insurance companies, hospitals, and providers, in ways both official and unofficial, intended and unintended, visible and invisible. The American way of rationing is a complex, fragmented, and often contradictory blend of policies and practices, unique to the United States. ... Health care has been rationed by race, in the case of the Jim Crow health system and other types of racial discrimination; by region, in the case of the uneven distribution of health facilities and personnel throughout the country; by employment and occupation, in the case of the job-based health insurance system; by address, in the case of residency requirements for various kinds of health care; by type of insurance coverage, in the case of health insurance that limits benefits and choice of doctor and hospital; by parental status, in the case of Medicaid (childless individuals are often excluded); by age, in the case of Medicare and the State Children's Health Insurance Programs—and the list goes on. These types of health care organization ... have rarely been called rationing. ...

Projected Medicare Spending

Via an email from Austin Frakt with the subject "should we worry a lot about Medicare growth?," and the answer in the text "It doesn't seem like it. Massively demographically driven. A bit more revenue and it's fixed for a long time." [Remember that projected health care cost growth is the main source of worry about future debt problems, and hence the driving force behind the push from deficit hawks for spending cuts and tax increases, well spending cuts anyway, the so-called deficit hawks are not so fond of tax increases which betrays their true motives.]:

Chart of the day: Projected Medicare spending, by Austin Frakt: The vertical axis is percent of GDP. “Excess cost growth” means in excess of the rate of GDP growth. The chart is from a new ASPE report by Richard Kronick and Rosa Po. Description of OACT’s alternative scenario is here, beginning on page 12 (PDF). Note that in addition to assuming a perpetual doc fix, it also assumes “a gradual phase-down of the productivity adjustments [about which, see Figure 1 here] and the elimination of the IPAB requirements.” Given these, is an excess cost growth totaling three-quarters of a percentage point of GDP over two decades a lot?

UPDATE: Link to and quote from the OACT’s alternative scenario

Update: Austin adds a clarification:

I'm not sure I buy my own statement that we only need a bit more revenue. The demographics are costly. The real message is that there is nothing much we can do about it. Cutting beneficiaries or benefits amounts to a cost shift, and is probably net cost increasing, system-wide. So, we must spend the demographically-driven amount. We then just need a bit more to deal with health care cost inflation. One would like to reduce that to zero, but a modest increase won't kill us, and certainly not quickly.

Health Exchanges: Competition versus Standardization

Jonathan Gruber describes a "central tension" in online health exchanges: more choices and more competition versus standardization that makes choices between plans abundantly clear:

The health-insurance markets of the (very near) future, MIT News: An online health-insurance exchange is coming to your state. How effective will it be?

That is an increasingly important question in the United States. In June 2012, the Supreme Court upheld the legality of the country’s Affordable Care Act, passed by Congress and signed into law by President Barack Obama in 2010. The program mandates private-sector health insurance for all citizens, and provides subsidies for those who otherwise could not afford it. Insurance-plan choices will be available through exchanges, or marketplaces; most people will be able to study plans and sign up for one online. As of December, nearly 20 states have elected to run exchanges themselves; the federal government will run the exchanges in other states.

And therein lies a key issue: Creating a consumer-friendly exchange is no easy task. It is hard enough to know what kinds of foods we should eat, which cars to drive, or which apps to use. Selecting an insurance plan is a far more complex decision.

“Health insurance is a confusing and difficult choice,” says Jonathan Gruber, a professor of economics at MIT who specializes in health-care issues. “It’s important that people make decisions in an organized and effective market. In that way they can make the best choices, and we can ensure the best level of competition among insurers.” ...

Moreover, as Gruber readily acknowledges, state-run insurance exchanges must pull off a difficult balancing act. The point of markets is to provide competition, but academic research shows that when people are given too many choices, they struggle to select logical options for themselves.

“The tension that exchanges face,” Gruber says, “is [having] enough standardization to make choice and competition work effectively, but not so much standardization that people can’t find the plans that best fit their tastes. That’s absolutely a central tension.” To handle this challenge, policymakers and academic researchers will almost certainly have to collaborate in productive ways.

Indeed, plenty of research suggests that America’s existing health-care offerings are already too complex. ...[more]...

'Disease Burden Links Ecology to Economic Growth'

Many development economists argue that "the foundation of economic growth is in political and economic institutions." This research argues that "vector-borne and parasitic diseases" are just as important as "crime or government corruption" in explaining the global distribution of income. This is not my area, so I won't comment on the quality of this research, but hoping development economists will chime and explain the degree to which these results should be noted or ignored:

Disease burden links ecology to economic growth, EurekAlert: A new study, published December 27 in the open access journal PLOS Biology, finds that vector-borne and parasitic diseases have substantial effects on economic development across the globe, and are major drivers of differences in income between tropical and temperate countries. The burden of these diseases is, in turn, determined by underlying ecological factors: it is predicted to rise as biodiversity falls. This has significant implications for the economics of health care policy in developing countries, and advances our understanding of how ecological conditions can affect economic growth.

According to conventional economic wisdom, the foundation of economic growth is in political and economic institutions. "This is largely Cold War Economics about how to allocate property rights—with the government or with the private sector," says Dr Matthew Bonds, an economist at Harvard Medical School, and the lead author of the new study. However, Dr Bonds and colleagues were interested instead in biological processes that transcend such institutions, and which might form a more fundamental economic foundation.

The team was intrigued by the fact that tropical countries are generally comprised of poor agrarian populations while countries in temperate regions are wealthier and more industrialized. This distribution of income is inversely related to the burden of disease, which peaks at the equator and falls along a latitudinal gradient. Although it is common to conclude that economics drives the pattern of disease, the authors point out that most of the diseases that afflict the poor spend much of their life-cycle outside the human host. Many cannot even survive outside the tropics. Their distribution is largely determined by ecological factors, such as temperature, rainfall, and soil quality.

Because of the high correlations between poverty and disease, determining the effects of one on the other was the central challenge of their statistical analysis. Most previous attempts to address this topic ignored disease ecology, argue Bonds and colleagues. The team assembled a large data set for all of the world's nations on economics, parasitic and infectious vector-borne diseases, biodiversity (mammals, birds and plants) and other factors. Knowing that diseases are partly determined by ecology, they used a powerful set of statistical methods, new to macroecology, that allowed variables that may have underlying relationships with each other to be teased apart.

The results of the analysis suggest that infectious disease has as powerful an effect on a nation's economic health as governance, say the authors. "The main asset of the poor is their own labor," says Dr Bonds. "Infectious diseases, which are regulated by the environment, systematically steal human resources. Economically speaking, the effect is similar to that of crime or government corruption on undermining economic growth."

This result has important significance for international aid organizations, as it suggests that money spent on combating disease would also stimulate economic growth. ... The research sets the stage for a number of future analyses that need to lay bare the relationship between health care funding and economic development.

'Drug Company Money is Undermining Science'

Charles Seife:

How Drug Company Money is Undermining Science, by Charles Seife, Scientific American: ...In the past few years the pharmaceutical industry has come up with many ways to funnel large sums of money—enough sometimes to put a child through college—into the pockets of independent medical researchers who are doing work that bears, directly or indirectly, on the drugs these firms are making and marketing. The problem is not just with the drug companies and the researchers but with the whole system—the granting institutions, the research labs, the journals, the professional societies, and so forth. No one is providing the checks and balances necessary to avoid conflicts. Instead organizations seem to shift responsibility from one to the other, leaving gaps in enforcement that researchers and drug companies navigate with ease, and then shroud their deliberations in secrecy.

“There isn't a single sector of academic medicine, academic research or medical education in which industry relationships are not a ubiquitous factor,” says sociologist Eric Campbell, a professor of medicine at Harvard Medical School. Those relationships are not all bad. After all, without the help of the pharmaceutical industry, medical researchers would not be able to turn their ideas into new drugs. Yet at the same time, Campbell argues, some of these liaisons co-opt scientists into helping sell pharmaceuticals rather than generating new knowledge.

The entanglements between researchers and pharmaceutical companies take many forms. There are speakers bureaus: a drugmaker gives a researcher money to travel—often first class—to gigs around the country, where the researcher sometimes gives a company-written speech and presents company-drafted slides. There is ghostwriting: a pharmaceutical manufacturer has an article drafted and pays a scientist (the “guest author”) an honorarium to put his or her name on it and submit it to a peer-reviewed journal. And then there is consulting: a company hires a researcher to render advice. ...

It is not just an academic problem. Drugs are approved or rejected based on supposedly independent research. When a pill does not work as advertised and is withdrawn from the market or relabeled as dangerous, there is often a trail of biased research and cash to scientists. ...

The scientific community's answer to the conflict-of-interest problem is transparency. Journals, grant-making institutions and professional organizations press researchers to openly declare ... when they have any entanglements that might compromise their objectivity. ... It is an honor system. Researchers often fail to report conflicts of interest—sometimes because they do not even realize that they present a problem. ...

In theory, there is a backup system. ... When a scientist fails to report such a conflict, the university or hospital he or she works for is supposed to spot it and report it. And when a university or hospital is not doing its job catching conflicted research, then the government agency that funds most of that research—the National Institutes of Health—is supposed to step in. Unfortunately, that backup system is badly broken. ...

Paul Krugman: Life, Death and Deficits

 Raising the eligibility age for Social Security and Medicare is *not* the answer:

Life, Death and Deficits, by Paul Krugman, Commentary, NY Times: America’s political landscape is infested with many zombie ideas... And right now the most dangerous zombie is probably the claim that rising life expectancy justifies a rise in both the Social Security retirement age and the age of eligibility for Medicare... — and we shouldn’t let it eat our brains. ...

Now, life expectancy at age 65 has risen... But the rise has been very uneven..., any further rise in the retirement age would be a harsh blow to Americans in the bottom half of the income distribution, who aren’t living much longer, and who, in many cases, have jobs requiring physical effort that’s difficult even for healthy seniors. And these are precisely the people who depend most on Social Security. ...

While the United States does have a long-run budget problem, Social Security is not a major factor... Medicare, on the other hand, is a big budget problem. But raising the eligibility age, which means forcing seniors to seek private insurance, is no way to deal with that problem. ...

What would happen if we raised the Medicare eligibility age? The federal government would save only a small amount of money, because younger seniors are relatively healthy... Meanwhile, however, those seniors would face sharply higher out-of-pocket costs. How could this trade-off be considered good policy?

The bottom line is that raising the age of eligibility for either Social Security benefits or Medicare would be destructive, making Americans’ lives worse without contributing in any significant way to deficit reduction. Democrats ... who even consider either alternative need to ask themselves what on earth they think they’re doing.

But what, ask the deficit scolds, do people like me propose doing about rising spending? The answer is to do what every other advanced country does, and make a serious effort to rein in health care costs. Give Medicare the ability to bargain over drug prices. Let the Independent Payment Advisory Board, created as part of Obamacare to help Medicare control costs, do its job instead of crying “death panels.” (And isn’t it odd that the same people who demagogue attempts to help Medicare save money are eager to throw millions of people out of the program altogether?) ...

What we know for sure is that there is no good case for denying older Americans access to the programs they count on. This should be a red line in any budget negotiations, and we can only hope that Mr. Obama doesn’t betray his supporters by crossing it.

'It’s All About Health Care'

No matter how many times this point is made, it seems to get lost in budget discussions. Our budget problem is about health care costs, and it's a problem the private sector shares (so privatizing health care doesn't solve the problem unless you believe, contrary to the evidence, that this would reduce cost growth):

The single best graph on what’s driving our deficits, by Ezra Klein: From the Congressional Budget Office’s hot new white paper, “Options for Deficit Reduction“:

That’s all of the federal government’s spending in three graphs. The top graph is health care, including Medicare, Medicaid and the Affordable Care Act. The middle graph is Social Security. And then there’s literally everything else: Defense, education, infrastructure, food safety, R&D, farm subsidies, the FBI, etc.

What these three charts tell you is simple: It’s all about health care. Spending on Social Security is expected to rise, but not particularly quickly. Spending on everything else is actually falling. It’s health care that contains most all of our future deficit problems. And the situation is even worse than it looks on this graph: Private health spending is racing upwards even faster than public health spending ...

Paul Krugman: Medicaid on the Ballot

Medicaid faces large cuts if Romney is elected:

Medicaid on the Ballot, by Paul Krugman, Commentary, NY Times: There’s a lot we don’t know about what Mitt Romney would do if he won...; his economic “plan” is an empty shell.

But one thing is clear: If he wins, Medicaid ... will face savage cuts. Estimates suggest that a Romney victory would deny health insurance to about 45 million people who would have coverage if he lost, with two-thirds of that difference due to the assault on Medicaid.

So this election is, to an important degree, really about Medicaid. And this, in turn, means that you need to know something more about the program. ...

Medicaid is generally viewed as health care for the nonelderly poor... For those who get coverage through the program, Medicaid is a much-needed form of financial aid. It is also, quite literally, a lifesaver. Mr. Romney has said that a lack of health insurance doesn’t kill people in America; oh yes, it does, and states that expand Medicaid coverage show striking drops in mortality.

So Medicaid does a vast amount of good. But at what cost? There’s a widespread perception, gleefully fed by right-wing politicians and propagandists, that Medicaid has “runaway” costs. But the truth is just the opposite. ... Medicaid is significantly better at controlling costs than the rest of our health care system. ...

Is Medicaid perfect? Of course not. Most notably, the hard bargain it drives with health providers means that quite a few doctors are reluctant to see Medicaid patients. Yet given the problems facing American health care — sharply rising costs and declining private-sector coverage — Medicaid has to be regarded as a highly successful program. It provides good if not great coverage to tens of millions of people who would otherwise be left out in the cold, and as I said, it does much right to keep costs down.

By any reasonable standard, this is a program that should be expanded, not slashed — and a major expansion of Medicaid is part of the Affordable Care Act.

Why, then, are Republicans so determined to do the reverse, and kill this success story? You know the answers. Partly it’s their general hostility to anything that helps the 47 percent — those Americans whom they consider moochers who need to be taught self-reliance. Partly it’s the fact that Medicaid’s success is a reproach to their antigovernment ideology.

The question — and it’s a question the American people will answer very soon — is whether they’ll get to indulge these prejudices at the expense of tens of millions of their fellow citizens.

'The Health Mandate Romney Still Supports'

Eliminate boredom at meetings blogging -- quick one -- Bruce Bartlett on Mitt Romney's (silly) claim that the individual mandate for health insurance is unnecessary because people can get the care they need at emergency rooms:

The Health Mandate Romney Still Supports, by Bruce Bartlett, Commentary, NY Times: Republicans ... are adamantly opposed to government paying for health care or a mandate requiring people to buy health insurance. At the same time, they recognize that they cannot say ... that if a dying person shows up at an emergency room without insurance, that person will be left to die in the street. Thus they support a little-known mandate requiring hospitals to treat the uninsured, the Emergency Medical Treatment and Active Labor Act.

Often referred to as Emtala, the bill ... was signed into law by Ronald Reagan... It was enacted because, previously, people had in fact been left to die in the street... Since then, Republicans have routinely cited Emtala as a key reason that the United States already has de facto national health insurance...

In fact, the Emergency Medical Treatment and Active Labor Act isn’t even remotely a substitute for health insurance... It does not demand that all hospitals care for whoever walks in, only those who require urgent care to avoid serious injury or life-threatening consequences. Only hospitals that both participate in Medicare and have emergency rooms are covered by the law...

A new report ... found that hospitals continue to engage in a practice known as “patient dumping” – turning away uninsured patients from emergency rooms despite the law. One reason they are able to do so is because in 2003 the George W. Bush administration eased the rules regarding Emtala. ...

The ... mandate on hospitals ... is a very inadequate and inefficient substitute for health insurance – something Mr. Romney used to acknowledge – and every bit as much a violation of Republican principles, which oppose unfunded mandates, as the individual mandate that they abhor.

Paul Krugman: Death By Ideology

Mitt Romney's comments about health care "clearly demonstrate that Mr. Romney has no idea what life (and death) are like for those less fortunate than himself":

Death By Ideology, by Paul Krugman, Commentary, NY Times: Mitt Romney doesn’t see dead people. But that’s only because he doesn’t want to see them; if he did, he’d have to acknowledge the ugly reality of what will happen if he and Paul Ryan get their way on health care.

Last week,... Mr. Romney declared that nobody in America dies because he or she is uninsured: “We don’t have people that become ill, who die in their apartment because they don’t have insurance.” This followed on an earlier remark by Mr. Romney — echoing an infamous statement by none other than George W. Bush — in which he insisted that emergency rooms provide essential health care to the uninsured.

These are remarkable statements. ... Even the idea that everyone gets urgent care when needed from emergency rooms is false. Yes, hospitals are required ... to treat people in dire need, whether or not they can pay. But ... you will be billed, and ... fear of huge bills can deter the uninsured from visiting the emergency room even when they should. And sometimes they die as a result.

More important, going to the emergency room ... is no substitute for regular care, especially if you have chronic health problems. When such problems are left untreated — as they often are among uninsured Americans — a trip to the emergency room can all too easily come too late to save a life.

So the reality, to which Mr. Romney is somehow blind, is that ... lack of insurance is responsible for thousands, and probably tens of thousands, of excess deaths... But that’s not a fact Mr. Romney wants to admit, because he and his running mate want to repeal Obamacare and slash funding for Medicaid — actions that would take insurance away from some 45 million nonelderly Americans, causing thousands of people to suffer premature death. And their longer-term plans to convert Medicare into Vouchercare would deprive many seniors of adequate coverage,... leading to still more unnecessary mortality. ...

So let’s be brutally honest here. ... Mr. Romney and Mr. Ryan are proposing trillions of dollars in tax cuts for the wealthy. So a literal description of their plan is that they want to expose many Americans to financial insecurity, and let some of them die, so that a handful of already wealthy people can have a higher after-tax income.

It’s not a pretty picture — and you can see why Mr. Romney chooses not to see it.

'Romney Sticks to Ridiculous Emergency-Room Argument'

In case you missed Romney's 'they can always go to emergency rooms argument,' here's Steve Benen:

Romney sticks to ridiculous emergency-room argument, by Steve Benen: Just three weeks ago, CBS's Scott Pelley asked Mitt Romney, "Does the government have a responsibility to provide health care to the 50 million Americans who don't have it today?" The Republican didn't answer the question directly, but instead suggested there's no cause for alarm -- the uninsured can rely on emergency rooms.

The exchange was widely panned for being both callous and ignorant, and yet, as Rebecca Leber noted, Romney apparently can't help himself. ...

Sigh. It's disconcerting to see Romney stick to such a ridiculous position, but my greater fear is that the Republican candidate actually believes what he's saying. ...[W]e know exactly why he keeps talking like this: under his approach, the number of Americans without health insurance will soar. ...

Romney's argument isn't a responsible approach to American health care in the 21st century; Romney's argument is ridiculous.

The Effects of Medicaid Eligibility

This is from the NBER:

Saving Teens: Using a Policy Discontinuity to Estimate the Effects of Medicaid Eligibility, by Bruce D. Meyer, Laura R. Wherry, NBER Working Paper No. 18309, Issued in August 2012: [Open Link to Paper]: This paper uses a policy discontinuity to identify the immediate and long-term effects of public health insurance coverage during childhood. Our identification strategy exploits a unique feature of several early Medicaid expansions that extended eligibility only to children born after September 30, 1983. This feature resulted in a large discontinuity in the lifetime years of Medicaid eligibility of children at this birthdate cutoff. Those with family incomes at or just below the poverty line had close to five more years of eligibility if they were born just after the cutoff than if they were born just before. We use this discontinuity in eligibility to measure the impact of public health insurance on mortality by following cohorts of children born on either side of this cutoff from childhood through early adulthood. We examine changes in rates of mortality by the underlying causes of death, distinguishing between deaths due to internal and external causes. We also examine outcomes separately for black and white children. Our analysis shows that black children were more likely to be affected by the Medicaid expansions and gained twice the amount of eligibility as white children. We find a substantial effect of public eligibility during childhood on the later life mortality of black children at ages 15-18. The estimates indicate a 13-18 percent decrease in the internal mortality rate of black teens born after September 30, 1983. We find no evidence of an improvement in the mortality of white children under the expansions.

I'll let people connect their own dots, if they think it's appropriate, between who is helped and who is not and the current debate over Medicaid funding.

Paul Krugman: The Real Referendum

If Obama wins, will he betray the "clear mandate for preserving and extending" the social insurance system that voters will have given to him?:

The Real Referendum, by Paul Krugman, Commentary, NY Times: Republicans came into this campaign believing that it would be a referendum on President Obama, and that still-high unemployment would hand them victory on a silver platter. But given the usual caveats — a month can be a long time in politics... — it doesn’t seem to be turning out that way.

Yet there is a sense in which the election is indeed a referendum... Voters are, in effect, being asked to deliver a verdict on the legacy of the New Deal and the Great Society, on Social Security, Medicare and, yes, Obamacare...

If the polls are any indication, the result of that referendum will be a clear reassertion of support for the safety net, and a clear rejection of politicians who want to return us to the Gilded Age. But here’s the question: Will that election result be honored?

I ask that question because we already know what Mr. Obama will face if re-elected: a clamor from Beltway insiders demanding that he immediately return to his failed political strategy of 2011, in which he made a Grand Bargain over the budget deficit his overriding priority. Now is the time, he’ll be told, to fix America’s entitlement problem once and for all. There will be calls ... for him to officially endorse Simpson-Bowles...

And Mr. Obama should just say no,... the fact is that Simpson-Bowles is a really bad plan, one that would undermine some key pieces of our safety net. And if a re-elected president were to endorse it, he would be betraying the trust of the voters who returned him to office. ...

Now, there’s no mystery about why Simpson-Bowles looks the way it does. It was put together in a political environment in which progressives, and even supporters of the safety net as we know it, were very much on the defensive — an environment in which conservatives were presumed to be in the ascendant, and in which bipartisanship was effectively defined as the effort to broker deals between the center-right and the hard right.

Barring an upset, however, that environment will come to an end on Nov. 6. This election is, as I said, shaping up as a referendum on our social insurance system, and it looks as if Mr. Obama will emerge with a clear mandate for preserving and extending that system. It would be a terrible mistake, both politically and for the nation’s future, for him to let himself be talked into snatching defeat from the jaws of victory.

Competition Will Not Reduce The Price Of Medicare

It wouldn't hurt to emphasize this point once again. Competition "won’t give us cheap healthcare":

Why Competition Will Not Reduce The Price Of Medicare, Cheap Talk: Mitt Romney and Paul Ryan have proposed a plan to allow private firms to compete with Medicare to provide healthcare to retirees. Beginning in 2023, all retirees would get a payment from the federal government to choose either Medicare or a private plan. The contribution would be set at the second lowest bid made by any approved plan.

Competition has brought us cheap high definition TVs, personal computers and other electronic goods but it won’t give us cheap healthcare. The healthcare market is complex because some individuals are more likely to require healthcare than others. The first point is that as firms target their plans to the healthy, competition is more likely to increase costs than lower them. David Cutler and Peter Orzag have made this argument. But there is a second point: the same factors that lead to higher healthcare costs also work against competition between Medicare and private plans. Unlike producers of HDTVs, private plans will not cut prices to attract more consumers so competition will not reduce the price of Medicare. A simple example exposes the logic of these two arguments. ...[gives example]...

But there is an additional effect. Traditional competitive analysis would predict that one private plan or another will undercut the other plans to get more sales and make more profits. This is the process that gives us cheap HDTVs. The hope is that similar price competition should reduce the costs of healthcare. Unfortunately, competition will not work in this way in the healthcare market because of adverse selection. ...[continues example]...

So, adverse selection prevents the kind of competition that lowers prices. The invisible hand of the market cannot reduce costs of provision by replacing the visible hand of the government.

'Is Medicare Really Going Bankrupt? Definitely Not'

Trudy Lieberman of the Columbia Journalism Review catches CNN getting something right:

Medicare ‘bankruptcy’: CNN gets it right, by Trudy Lieberman: Hooray for CNN.com, for fact checking the often-heard claim of Medicare’s “impending” bankruptcy. CNN’s contribution sets a high bar...

The “bankruptcy” language comes up a lot. ... But is Medicare really going bankrupt? Definitely not, says CNN. The network is correct, and the point is crucial.

How did CNN pull away from the fact-checking pack on this one? ... First, CNN reported, as CJR has urged news outlets to do, that only one part of Medicare is in potential trouble—the Hospital Trust Fund, which is financed by payroll taxes. The other parts of Medicare, including Part B, which finances doctor visits, lab tests, and outpatient services, “are adequately financed for now,” Medicare trustees have said. ...

CNN pushed further and asked a logical question that most reporters writing about Medicare have missed. When the magic date for “bankruptcy” arrives—2024 according to the Dems, or 2016 if the ACA disappears in a Romney presidency—would Medicare really disappear? Jonathan Oberlander, a health policy expert at the University of North Carolina, told CNN that ... “Medicare is not going bankrupt. Medicare would still have most of the necessary funds to pay those expenses and other parts of the program would be unaffected. Medicare won’t go bankrupt in the literal sense in 2016 or 2024 or 2064—or ever.” The Centers for Medicare and Medicaid Services, which runs the Medicare program, said this year that even in 2024 the Medicare hospital trust fund could still pay 87 percent of its estimated expenditures, and noted that, “in practice, Congress has never allowed a Medicare trust fund to exhaust its assets.” ...

That’s not to say that Medicare’s cost explosion is not a problem. How to control cost—not just for Medicare but for al the rest of the healthcare system, too—is a central issue that the press needs to clarify. ...

Is Romney 'Preparing for a Major Fold' on Health Care?

Brad DeLong:

Why Oh Why Did the Republicans Nominate This Clown?, by Brad DeLong: ObamaCare allows parents to keep their young-adult children on their insurance, requires insurers to offer guaranteed issue and community rates, and imposes an individual mandate to purchase insurance on individuals.

Now comes Mitt Romney:

Romney says he won't repeal all of Obamacare: Mitt Romney says his pledge to repeal President Barack Obama's health law doesn't mean that young adults and those with medical conditions would no longer be guaranteed health care.

So there we have it: Romney will keep the parts of ObamaCare that are young-adult coverage, and guaranteed issue and community rates.

It continues:

The Republican presidential nominee says he'll replace the law with his own plan. He tells NBC's "Meet the Press" that the plan he worked to pass while governor of Massachusetts…

So there we have it: Romney will keep the parts of ObamaCare that imposes on individual mandate to purchase insurance.

So what's left?

Romney says he doesn't plan to repeal of all of Obama's signature health care plan. He says there are a number of initiatives he likes in the Affordable Care Act that he would keep in place if elected president…

Like: the whole thing. Duh.

There is something very wrong with anybody working for, contributing to, or arguing for Ryan-Romney right now.

Tyler Cowen pats himself on the back:

I would say he is preparing for a major fold on the issue. I’ve been predicting a Romney administration would block grant Medicaid, undo some or all of the Medicare savings in ACA, but essentially keep the mandate under a different label and then claim to have “repealed and replaced.” The story is here.

I won't complain about "a major fold" on healthcare, but it does bring up a question. Does Romney stand for anything? He seems to know how to set his principles aside and submit to the highest bidder -- something his touted business experience taught him I suppose. But with all of the flip-flops, Etch-a-Sketch moments, his refusal to take a stand on budget cuts, his dishonest campaigning, etc., etc., is there any principle that Romney won't conveniently overlook if it looks like there's a few votes to be gained?

Paul Krugman: The Medicare Killers

Paul Ryan’s 'big lie' about Medicare:

The Medicare Killers, by Paul Krugman, Commentary, NY Times: Paul Ryan’s speech Wednesday night may have accomplished one good thing: It finally may have dispelled the myth that he is a Serious, Honest Conservative. Indeed, Mr. Ryan’s brazen dishonesty left even his critics breathless. ...

But Mr. Ryan’s big lie — and, yes, it deserves that designation — was his claim that “a Romney-Ryan administration will protect and strengthen Medicare.” Actually, it would kill the program. ...

The Republican Party is now firmly committed to replacing Medicare with what we might call Vouchercare. The government ... would give you a voucher that could be applied to the purchase of private insurance..., the vouchers almost certainly would be inadequate...

Why would anyone think that this was a good idea..., wouldn’t private insurers reduce costs through the magic of the marketplace? No. All, and I mean all, the evidence says that public systems like Medicare and Medicaid ... are better than the private sector at controlling costs. ...

So Vouchercare would mean higher costs and lower benefits for seniors. Over time, the Republican plan wouldn’t just end Medicare as we know it, it would kill the thing Medicare is supposed to provide: universal access to essential care. Seniors who couldn’t afford to top up their vouchers with a lot of additional money would just be out of luck.

Still, the G.O.P. promises to maintain Medicare as we know it for those currently over 55. Should everyone born before 1957 feel safe? Again, no.

For one thing, repeal of Obamacare would cause older Americans to lose a number of significant benefits..., including the way it closes the “doughnut hole” in drug coverage and the way it protects early retirees.

Beyond that, the promise of unchanged benefits for Americans of a certain age just isn’t credible. Think about the political dynamics that would arise once someone born in 1956 still received full Medicare while someone born in 1959 couldn’t afford decent coverage. ... For sure, it would unleash political warfare between the cohorts — and the odds are high that older cohorts would soon find their alleged guarantees snatched away.

The question now is whether voters will understand what’s really going on (which depends to a large extent on whether the news media do their jobs). Mr. Ryan and his party are betting that they can bluster their way through this, pretending that they are the real defenders of Medicare even as they work to kill it. Will they get away with it?

'Evidence vs. Ideology' and 'Romney’s Lying Machine'

Laura D’Andrea Tyson:

Evidence vs. Ideology in the Medicare Debate, by Laura D’Andrea Tyson, Commentary, NY Times: When formulating public policy, evidence should be accorded more weight than ideology, and facts should matter... The ... Romney campaign has been deliberately misrepresenting President Obama’s Medicare record.

Mitt Romney characterizes the $716 billion of Medicare savings over the next 10 years, contained in the Affordable Care Act, as President Obama’s “raid” on the Medicare program to pay for his health care program. This fear-mongering is simply untrue. These savings result from reforms to slow the growth of Medicare spending per enrollee – there are no cuts in Medicare benefits. ...

Both Governor Romney and Representative Paul D. Ryan have promised to repeal the Affordable Care Act and with it the reforms behind the $716 billion in Medicare savings (although Mr. Ryan duplicitously counts the savings from these reforms in his deficit-reduction plan). Medicare beneficiaries would ... lose the benefits..., and they would be forced to pay higher premiums and co-pays as a result of faster growth in Medicare costs.

President Obama’s health care plan is not a raid on Medicare; it is an investment in a stronger system. If the Affordable Care Act had not met this standard, the AARP would not have endorsed it. ...

Now Mr. Ryan has espoused – and Governor Romney has embraced — a proposal to transform Medicare into a premium support system. ... There is no evidence that such a system would control Medicare spending more effectively than the current Medicare program strengthened by Affordable Care Act reforms. Indeed,...the C.B.O. has concluded that ... such plans would drive up total health-care spending per Medicare beneficiary...

A voucher system would do little to control the growth of health care costs, but it would shift their burden onto Medicare beneficiaries in the form of higher premiums and reduced care. Cost-shifting should not be confused with cost containment. ...

A “serious” deficit hawk committed to saving and strengthening Medicare, not one whose primary goals are repealing health-care reform and cutting taxes for the wealthy, would base his Medicare plan on the evidence. ...

Robert Reich is astounded at the Romney-Ryan campaign:

Romney’s Lying Machine, by Robert Reich: I’ve been struck by the baldness of Romney’s repetitive lies about Obama — that Obama ended the work requirement under welfare, for example, or that Obama’s Affordable Care Act cuts $716 billion from Medicare benefits. ...

Every campaign is guilty of exaggerations, embellishments, distortions, and half-truths. But this is another thing altogether. I’ve been directly involved in seven presidential campaigns, and I don’t recall a presidential candidate lying with such audacity, over and over again. Why does he do it, and how can he get away with it?

The obvious answer is such lies are effective. Polls show voters are starting to believe them... Romney’s lying machine is extraordinarily well financed. ... Romney’s lying machine is working.

But what does all this tell us about the man who is running this lying machine? (Or if Romney’s not running it, what does it tell us about a man who would select the people who are?)

We knew he was a cypher — that he’ll say and do whatever is expedient, change positions like a chameleon, eschew any core principles.

Yet resorting to outright lies — and organizing a presidential campaign around a series of lies — reveals a whole new level of cynicism, a profound disdain for what remains of civility in public life, and a disrespect of the democratic process.

The question is whether someone who is willing to resort to such calculated lies, and build a campaign machine around them, can be worthy of the public’s trust with the most powerful office in the world.

The press is completely dropping the ball in its duty to inform voters (surprise!). If stories consistently opened up with something along the lines of "The Romney campaign continued to make lies and misleading inferences the centerpiece of its campaign today...," this would stop. (It would also be worth noting, I think, that making lies about the other side the most prominent feature of a campaign is a pretty good indication that the candidate has no new ideas of his own to present. But simply pointing out the lies -- and the massive number of flip-flops of convenience -- would go a long way toward fulfilling the duty of the press to inform voters rather than mislead them by presenting false claims as legitimate debate.)

'Patients Would Pay More if Romney Restores Medicare Savings'

Mitt Romney’s promise to restore Obama's Medicare savings is “both puzzling and bogus":

Patients Would Pay More if Romney Restores Medicare Savings, Analysts Say, by Jackie Calmes, NY Times: Mitt Romney’s promise to restore $716 billion that he says President Obama “robbed” from Medicare has some health care experts puzzled, and not just because his running mate, Representative Paul D. Ryan, included the same savings in his House budgets.

The 2010 health care law cut Medicare reimbursements to hospitals and insurers, not benefits for older Americans, by that amount over the coming decade. But repealing the savings, policy analysts say, would hasten the insolvency of Medicare by eight years — to 2016, the final year of the next presidential term, from 2024.

While Republicans have raised legitimate questions about the long-term feasibility of the reimbursement cuts, analysts say, to restore them in the short term would immediately add hundreds of dollars a year to out-of-pocket Medicare expenses for beneficiaries. That would violate Mr. Romney’s vow that neither current beneficiaries nor Americans within 10 years of eligibility would be affected by his proposal to shift Medicare to a voucherlike system in which recipients are given a lump sum to buy coverage from competing insurers.

For those reasons, Henry J. Aaron, an economist and a longtime health policy analyst at the Brookings Institution and the Institute of Medicine, called Mr. Romney’s vow to repeal the savings “both puzzling and bogus at the same time.”

Marilyn Moon, vice president and director of the health program at the American Institutes for Research, calculated that restoring the $716 billion in Medicare savings would increase premiums and co-payments for beneficiaries by $342 a year on average over the next decade; in 2022, the average increase would be $577. ...

Whose Plan Destroys Medicare?

Robert Reich says to spread the word about who really wants to gut Medicare:

Whose Plan Destroys Medicare — Obama’s or Romney-Ryan's?, by Robert Reich: Stumping in Florida today, Mitt Romney charged President Obama’s Affordable Care Act will “cut more than $700 billion” out of Medicare.

What Romney didn’t say was that his running-mate’s budget — approved by House Republicans and by Romney himself — would cut Medicare by the same amount. The big difference, though, is the Affordable Care Act achieves these savings by reducing Medicare payments to drug companies, hospitals, and other providers rather than cutting payments to Medicare beneficiaries.

The Romney-Ryan plan, by contrast, achieves its savings by turning Medicare into a voucher whose value doesn’t keep up with expected increases in healthcare costs — thereby shifting the burden onto Medicare beneficiaries, who will have to pay an average of $6,500 a year more for their Medicare insurance, according an analysis of the Republican plan by the non-partisan Congressional Budget Office.

Moreover, the Affordable Care Act uses its Medicare savings to help children and lower-income Americans afford health care, and to help seniors pay for prescription drugs by filling the so-called “donut hole” in Medicare Part D coverage.

The Romney-Ryan plan uses the savings to finance even bigger tax cuts for the very wealthy.

Spread the word. Don’t allow the GOP to get away with this demagoguery.

Yes, don't let Republicans get away with this. [See also: The Republican ticket’s big Medicare myth, by Ezra Klein.]

Socialized Medicine in the US

Uwe Reinhardt has a dare for "presidential candidates professing a distaste for socialized medicine":

Where ‘Socialized Medicine’ Has a U.S. Foothold, by Uwe E. Reinhardt: Last Friday’s exuberant celebration of Britain’s National Health Service during the opening ceremony for the 2012 Olympics ... elicited ... stern rebukes from the commentariat in the United States, most vehemently by Rush Limbaugh. Bashing the N.H.S. has become a favorite ritual during any debate on health care reform on this side of the Atlantic. ...

Remarkably, Americans of all political stripes have long reserved for our veterans the purest form of socialized medicine, the vast health system operated by the U.S. Department of Veterans Affairs... If socialized medicine is as bad as so many on this side of the Atlantic claim, why have both political parties ruling this land deemed socialized medicine the best health system for military veterans? Or do they just not care about them?” ...

Occasionally one does come across an American politician who mutters something about privatizing the V.A. health system. I doubt this idea would have much political traction... In fact, I would dare presidential candidates professing a distaste for socialized medicine to call openly for abolition of the V.A. health system in favor of a purely privatized system – e.g., a defined contribution system such as that advocated for Medicare by Representative Paul D. Ryan, Republican of Wisconsin...

So far I have not received a satisfactory answer from detractors of “socialized medicine” to my question of why we have the V.A. health system when socialized medicine putatively is so evil. Perhaps some commentators ... will enlighten me.

Before responding, however, readers might consider these readings...: a book by Phillip Longman, “The Best Care Anywhere: Why V.A. Health Care Is Better Than Yours”; an article on V.A. health care in the American Medical Association’s amednews.com, and, finally, from the Rand Corporation’s nationally recognized team of experts on the quality of health care in the United States this eye-opening report.

The British Attachment to the NHS

Why was so much time devoted to the National Health Service (NHS) in the opening ceremony for the Olympics?:

Why the National Health Service played a central part in the Olympic Ceremony, by Simon Wren-Lewis: ...What is perhaps not understood outside the UK is that the British regard the NHS as an institution on an equal par to our monarchy. Not beyond criticism, but seen as absolutely essential to national life. While many aspects of the 1945 post-war social transformation have been swept aside (nationalization of utilities) or greatly modified, the idea that the health service should be free to all and paid for through taxation is sacrosanct. ...

Is this attachment to the NHS national self delusion? ... The NHS embodies a principle that in critical matters involving health, all members of a society should be equal. Overall the UK is not a particularly equal society, and income and wealth inequalities have been growing, but this is one area where there is a strong national consensus that while additional income should mean that you contribute more to a health service, this does not entitle you to receive better treatment.

Do the British pay dearly for this attachment to equality in health provision? If you look at measures of quality or efficiency, the UK does reasonably well (for example here or here), but what does appear consistent is how badly the US performs in terms of efficiency. ... So what seems more likely is that it is the US aversion to government involvement in health provision that is a little delusional. ...

Romer: Containing Health Costs

Christina Romer says, in reference to health care costs, that "serious debate over further cost-savings measures may be a long way off" because "Republicans seem more interested in just limiting the government’s share of health care expenditures than in slowing overall spending":

Only the First Step in Containing Health Costs, by Christina Romer, Commentary, NY Times: Here's a frightening thought: Despite the recent Supreme Court decision upholding the Affordable Care Act, serious work on more health care legislation is still needed.

Don’t get me wrong: the new law is a great step forward. It is expected to expand health insurance coverage to more than 30 million uninsured Americans without increasing the deficit, and it makes an important start on reining in the rapid growth of health care costs. ...

Just how much the law will slow spending growth is highly uncertain. The Congressional Budget Office, whose views on this issue fall squarely between the optimists’ and the pessimists’, estimates that it’s likely to reduce the budget deficit by about $1 trillion in its second decade — when the cost-containment measures have had time to pay dividends.

Big as those savings are, they will still leave a huge share of national output dedicated to health care and the federal budget far in the red. ...

Sadly, serious debate over further cost-savings measures may be a long way off. Some Republicans seem more interested in just limiting the government’s share of health care expenditures than in slowing overall spending. And some Democrats seem more interested in just preserving existing government programs than in making the entire health care system more efficient.

For the sake of the nation’s fiscal health, and the health and economic security of American families, it’s time to embrace cost containment in health care as the next great legislative challenge.

[The article details the cost-saving measures in the health care legislation, and discusses further steps that could be taken, but shies away from any suggestion that we adopt the types of universal care health care systems that have worked to contain costs in other countries.]

Medicaid

Tyler Cowen responds to Aaron Carroll: Aaron Carroll on Medicaid Wars

Aaron Carroll replies: Tyler Cowen on me on Medicaid Wars

Brad DeLong scores the battle

Medicaid in the Real World

I am supposed to be on vacation this week. I am going to try to keep up, links will still appear daily for example, but realistically posting will likely slow from its normal rate. For now, let me send you to an "annoyed" Aaron Carroll:

Let’s try to stick to the real world when we talk about Medicaid, by Aaron Carroll: Tyler Cowen had a piece in the NYT this weekend on Medicaid. He doesn’t seem too thrilled with its use in the ACA’s coverage expansion. ... I have to admit that his article set me off a bit. It could be that he didn’t have space in the NYT for more nuance. Perhaps he’ll provide it on his blog. In particular, I’d love him to address some of the points below…

I get a bit  annoyed when people claim that we can’t “afford” more government intervention or, god-forbid, single-payer. That kind of statement willfully ignores the fact that every country that has MORE government intervention spends LESS.

I get a bit annoyed by the claim that an expansion of government insurance leads to lines and waiting when lots of countries have universal access and less of a wait-time problem than we do. Moreover, almost no one makes this argument when we expand private insurance, only government.

I get a bit annoyed by blanket claims that doctors won’t accept Medicaid. Such statements often ignore the fact that the majority of Medicaid beneficiaries are children and pregnant women. We don’t need all types of doctors to accept Medicaid patients in equal numbers. ...

I get a bit annoyed when people just claim government programs are “unpopular”. Like Medicare? I don’t think so..., polling shows the opposite of what Tyler (and lots of others) suggest.

I get a bit annoyed at the blanket acceptance of the awesomeness of the free market in health care, when there is no phenomenal evidence of its success. And again, those countries with less free market are cheaper, universal, and often just as good. ...

Look, I get that people may not like the political implications of those systems. They may not like the governments that produce them. They may not like the lack of choice inherent in such systems. They may not like the potential  limitations within them for making money, and therefore for innovation. But we need to stop making stuff up about them.

House GOP Wastes Valuable Time with Health Care Vote

Floor time in Congress is scarce and valuable. So why is are House Republicans wasting time with a bill they know will be vetoed when there are much bigger problems to address, the unemployment crisis for example? You'd think that politics is more important than the struggles of the unemployed:

House GOP set for health care law repeal vote, but offering no alternatives, CBS News: House Republicans generally avoided talk of replacement measures on Tuesday as they mobilized for an election-season vote to repeal the health care law that stands as President Barack Obama's signature domestic accomplishment. ... [T]he repeal vote ... will lead to nothing as the Democratic Senate won't consider it, and even if the House and Senate somehow agreed to repeal the law, Mr. Obama has the ultimate say with his veto pen. ...

I understand what's going on, but it's still disappointing to see the unemployed fall by the wayside.

SCOTUS ACA Health Care Decision Panel: U.C. Berkeley (Video)

Via Brad DeLong, here's the schedule of speakers:

John Ellwood: 00:55
Jesse Choper: 15:00
Steve Shortell: 30:30
Brad DeLong: 45:50
Ann O'Leary: 55:30
Ann Marie Marciarille: 1:07:33
General Questions: 1:19:40

'Giving Health Care a Chance to Evolve'

Robert Frank discusses market failures in health insurance markets, and how the president's health care plan helps to overcome them:

Giving Health Care a Chance to Evolve, by Robert Frank, Commentary, NY Times: ...Nearly every economic analysis of the health care industry rests on the observation that individually purchased private insurance is not a viable business model...

The fundamental problem is that ... people ... with serious pre-existing conditions ... are likely to need expensive care. Any company that issued policies to such people at affordable rates would be driven into bankruptcy, its most profitable customers lured away by competitors offering lower rates made possible by selling only to healthy people.

Economists call this the adverse-selection problem. Because of it, unregulated private markets for individual insurance cannot accommodate the least healthy — those who most desperately need health insurance.

Many countries solve this problem by having the government provide health insurance for all. In some, like Britain, the government employs the care providers. Others, like France, reimburse private practitioners — as does the Medicare program for older Americans. ...

Modeled after proposals advanced by the Heritage Foundation, the American Enterprise Institute and other conservative research organizations in the 1990s, the main provisions of the president’s health care law were intended to eliminate the most salient problems associated with the current system. ...

It isn’t that people should buy health insurance because it would be good for them. Rather, failure to do so would cause significant harm to others. Society will always step in to provide care — though in much more costly and often delayed and ineffective forms — to the uninsured who fall ill. To claim the right not to buy health insurance is thus to assert a right to impose enormous costs on others. Many legal scholars insist that the Constitution guarantees no such right. ...

What’s important now is how ... the law will ... extend coverage to tens of millions who now lack it. In addition, new insurance exchanges will provide a broader array of care options. ... The point worth celebrating is that last week’s ruling will at last enable our distinctly dysfunctional health care system to evolve into something better.

[More on market failures in health insurance markets here and here.]

More on the Economics of the Mandate

In my discussion of the economics underlying the reason for the mandate (and the penalties needed to enforce it), I talked about the adverse selection problem, but I wish I would have talked about moral hazard as well since that is also part of the problem.

Under adverse selection, relatively healthy people drop out of insurance pools because they expect their health costs to be less than they would have to pay for insurance. As the relatively healthy people drop out, it raises the average cost of covering people (since the relatively healthy are no longer in the pool), which causes more people to drop out (the ones with expected costs that are now less than the higher premiums), which raises the price again, which causes more people to drop out, and so on until the market breaks down entirely.

But even healthy people have some chance of catastrophic illness, illness that could be deathly for example, so why wouldn't they purchase insurance in case this happens?

People know we are a compassionate society, and if they come down with a life threatening disease we will take care of them even if they don't have insurance, i.e. even if moral hazard causes them to shirk the personal responsibility conservatives hold so dear. Thus, relatively healthy people can take a chance and go without insurance secure in the knowledge that they will be treated if something awful happens. Broken bones, catastrophic illness and so on will be covered. But covered by whom? In many cases, the individual will not have sufficient resources to pay for the medical care, it would bankrupt them, so there is no choice but for all of the rest of us to pick up the bill.

A mandate stops this from happening. It forces those who would take a chance and go without care, those who are relying on all of the rest of us to insure them against large, unavoidable medical costs, to insure themselves against this. That is, it stops this moral hazard behavior. (Essentially, adverse selection is about the average or mean cost, moral hazard is about the variance -- loss of life, for example, can be viewed as a very bad draw that occurs with some probability and imposes very large, perhaps infinite costs.)

Adverse selection and moral hazard are not mutually exclusive. As you can see, they work together -- people with expected costs lower than premiums drop out knowing they are covered by the rest of us against a bad draw. A mandate, or its equivalent, helps to overcome both of these problems.

Paul Krugman: The Real Winners

The Supreme Court's decision on health care reform does not mark the end of the battle to improve health care in the US:

The Real Winners, by Paul Krugman, Commentary, NY Times: So the Supreme Court — defying many expectations — upheld the Affordable Care Act, a k a Obamacare. There will, no doubt, be many headlines declaring this a big victory for President Obama, which it is. But the real winners are ordinary Americans...

How many people are we talking about? You might say 30 million... But ... add in every American who currently works for a company that offers good health insurance but is at risk of losing that job...; every American who would have found health insurance unaffordable but will now receive crucial financial help; every American with a pre-existing condition who would have been flatly denied coverage in many states.

In short,... the winners from that Supreme Court decision are your friends, your relatives, the people you work with — and, very likely, you. ...

But what about the cost? Put it this way: the budget office’s estimate of the cost over the next decade ... is about only a third of the cost of the tax cuts, overwhelmingly favoring the wealthy, that Mitt Romney is proposing over the same period. ...

It’s not perfect, by a long shot — it is, after all, originally a Republican plan... And there will be a long struggle to make it better... But it’s still a big step toward a better — and by that I mean morally better — society.

Which brings us to the nature of the people who tried to kill health reform — and who will, of course, continue their efforts...

At one level, the most striking thing about the campaign against reform was its dishonesty. ... And, rest assured, all the old lies and probably a bunch of new ones will be rolled out again...

But what was and is really striking about the anti-reformers is their cruelty. It would be one thing if, at any point, they had offered any hint of an alternative proposal to help Americans with pre-existing conditions, Americans who simply can’t afford expensive individual insurance, Americans who lose coverage along with their jobs. But it has long been obvious that the opposition’s goal is simply to kill reform, never mind the human consequences. ...

The point is that this isn’t over — not on health care, not on the broader shape of American society. The cruelty and ruthlessness that made this court decision such a nail-biter aren’t going away.

But, for now, let’s celebrate. This was a big day, a victory for due process, decency and the American people.

The economics of the SCOTUS health care decision

Here's my response to the Supreme Court's ruling on health care reform (at CBSNews.com):

Health care decision: Why the mandate, or its equivalent, was critical: The Supreme Court ruled today that the health care mandate is a tax, and hence constitutional. A majority of the Justices ruled that the penalty that must be paid if someone refuses to buy insurance is a form of tax that Congress can impose under its taxing power. That is, of course, good news for supporters of health care reform since a mandate, or something like it, is needed to stop health care markets from breaking down due to what economists call an "adverse selection" problem.

The intent of the mandate is to overcome this adverse selection problem. Adverse selection, a type of market failure, plagues insurance markets of all types, and health care is no exception. The problem is that providers of health insurance do not have as much information about the health of the people buying the insurance as they have about themselves. The health insurance companies try to overcome this informational disadvantage through check-ups prior to granting coverage, health histories, and other means, but even so individuals are better informed about their current health and their health histories than the insurance companies.

As I explained in more detail here, , this can cause health care markets to break down: Here's the core of the argument:

"If insurance is offered in this market at somewhere near the average cost of care for the group, people will use the superior information they have about their own health status to determine if this is a good deal for them. All of the people expecting to pay less for health care than the price the companies are asking for the insurance will drop out of the market (the young and healthy for the most part; all that is actually needed is that some people are willing to take a chance and go without insurance). With the relatively healthy people dropping out of the insurance pool, the price of insurance must go up, and when it does, more people drop out, the price goes up again, and this repeats until the market breaks down and nobody (or hardly anybody) can purchase insurance."

In order for these markets to work, health insurance must be distributed over a wide variety of people so that the average cost of care will be affordable, and to stop the markets from breaking down. One way to ensure that the pool is broad-based is to require that anyone who might need health care -- i.e. everyone -- purchase health insurance, i.e. through a mandate.

A mandate is not the only way to ensure that a broad swathe of the population purchases health insurance in a common pool. For example, subsidies can also encourage many people to enroll. If enough people enroll because of subsidies, it will function much like a mandate. But a mandate along with fines to enforce it is the most effective way to ensure that the pool is large enough, and includes enough people who do not expect significant health care expenditures, to keep the cost of insurance low.

Update: More here, on a different but related market failure in health care markets, moral hazard.

The Pumwani Maternity Ward

Today we visited a maternity ward in a poor area of Nairobi to get a sense of the scale of the population explosion in Kenya, and the level of care for this population.

The charge for maternity care at this hospital is 3,000 shillings for a normal birth, and 6,000 shillings for a C-section, plus 400 shillings per day for room charges. (If you cannot pay at the end, they keep you for two weeks -- room charges accumulate -- then eventually release you. About 2% do not pay, and that comes to around a million shillings per month.)

Entrance

I was interested in a comment made during a presentation prior to the visit that health care for the poor is allocated by a voucher system. The vouchers cost 100 shillings, or a $1.25, That doesn't seem like a lot, but the population we visited yesterday, for example, is excluded by this practice (secondary options for care are not very good).

Post-natal training

I asked the government official making the presentation why they chose to allocate care in this way. The money they collect is nothing -- that can't be it -- it seems like an intentional exclusion of the lowest income population. The answer: they can't afford to cover everyone. Then why exclude this population? Why not adopt a different allocation mechanism that targets very specific areas of need? Why do they think this is the best way to allocate the money? There was an answer, but it didn't really address the question, and it left as many questions as it answered.

These will be occupied soon

I was left wondering how the voucher system came to be in the first place. I asked, again words were spoken, but there was no answer. Is this, for example, the result of some donor saying funds will be given, and insisting on an allocation mechanism that involves vouchers (it worked in Kenya, and it can work in the US too!)? Was it from economists in Kenya? I wish I had the answers.

I bet this is really effective

Another comment made by the director of the maternity ward interested me as well. We were told that every other hospital gets 2 million shillings per month to cover maintenance, gardening, and other expenses, but this one does not. We asked why, and the answer was: he wished he could tell us, but he didn't know. I suspect the money is ending up in someone's pocket, but who knows? Another puzzle is that they receive very little donation money (though this could have been a pitch to donors that exaggerated the conditions so that we would write about it -- there was no way to tell). But this is a place where donations could do a whole lot of good, and it's hard to imagine that some NGO wouldn't want to do this (there is a funder on the trip who thought donors should be salivating over this place). But donors do check before giving money, especially very large sums, and if the money is not epected to end up where it was intended to go, then they would be hesitant to begin a relationship. We were all puzzled by why donors shied away, and we tried hard to find out why. But, once again, there was no good answer, only more questions.

I'm finding that a lot here.

[We also had a presentation on female genital mutilation, or female circumcision as some insist on calling it, and it seemed to me it could be characterized, at least in part, as a multiple equilibrium, collective action problem with tipping points. So I asked what they knew about tipping points -- the point where the social pressure switches from doing it to not having it done as fewer and fewer have the procedure done to them, but that will have to wait -- we have to catch a plane to Lake Victoria to meet the CDC and see other things, like hippos coming to get water (apparently like clockwork) and we depart at 6 am. That's in five hours.]

A Back Door to the Public Option?

Robert Reich says there's still hope even if the Supreme Court strikes down the individual mandate in the Affordable Care Act:

A Back Door to the Public Option, by Robert Reich: Any day now the Supreme Court will issue its opinion on the constitutionality of the Accountable Care Act, which even the White House now calls Obamacare.

Most high-court observers think it will strike down the individual mandate in the Act that requires almost everyone to buy health insurance,... but will leave the rest of the new healthcare law intact.

But the individual mandate is so essential to spreading the ... cost of health care over the whole population, including younger and healthier people, that some analysts believe a Court decision that nixes the mandate will effectively spell the end of the Act anyway.

Yet it could have exactly the opposite effect. If the Court strikes down the individual mandate, health insurance company lobbyists and executives will swarm Capitol Hill seeking to have the Act amended to remove the requirement that they insure people with pre-existing medical conditions. They’ll argue that without the mandate they can’t afford to cover pre-existing conditions.

But the requirement to cover pre-existing conditions has proven to be so popular with the public that Congress will be reluctant to scrap it. This opens the way to a political bargain. Insurers might be let off the hook, for example, only if they support allowing every American, including those with pre-existing conditions, to choose ... something very much like Medicare. In effect, what was known during the debate over the bill as the “public option.” ...

The fact is, there’s enough the public likes about Obamacare that if the Court strikes down the individual mandate that won’t be the end. It will just be the end of the first round.

I'd like to think he's right, but hard for me to see this happening. [Here's an old post explaining why an individual mandate is needed.]

"The Fork in the Road for Health Care"

Uwe Reinhardt wonders how long will workers continue to tolerate an employer-based health care insurance system that allows wage gains to be "wiped out" by increases in health care costs:

The Fork in the Road for Health Care, by Uwe E. Reinhardt, Commentary, NY Times: Milliman, the global actuarial and employee benefit consulting firm, released its annual Milliman Medical Index for 2012 on May 15. ... For 2012, the nationwide average of the total health spending for a typical family of four was estimated by Milliman to be $20,728. ... A just-released study by the Health Care Cost Institute shows that much of these spending increases are the result of rising prices and not of rising use. ...

On average, according to Milliman, employers contributed 58 percent, or $12,144, to the total cost of $20,728, through contributions to their employees’ health insurance premiums. The family itself contributed another 25 percent, or $5,114, toward the premium via direct payroll deduction. In addition, it spent 17 percent, or $3,470, out of pocket for health care.

Although the family’s contribution of $8,584 is by no means trivial, it is less than half of the total average cost of a family’s health care cost. Most employees probably believe that “the company” – that is, its owners – absorbs the other 58 percent of the family’s total health spending.

Economists have long argued that this is an illusion – that over the longer haul the bulk and possibly all of the ostensibly employer-paid health insurance premiums gets indirectly shifted back into the employee’s paycheck through lower increases in take-home pay. ...

This point on backward cost-shifting was driven home recently in a paper in Health Affairs by David Auerbach and Arthur Kellerman. The authors present data showing that a decade of health care cost growth in employer-based health insurance “has wiped out real income gains for an average U.S. family” from 1999 through 2009. Health care has come to chew up American household budgets like Pacman. ...

Americans are fond of the idea that individuals and families should be self-reliant. But a question confronting the American public and their political representatives is how they imagine households with money income of, say, $30,000 to $50,000 will tolerate the ever-larger bites the health care Pacman seeks to take out of their budgets. ...

Health Care Costs are the Problem

Another reminder that the long-run budget problem is a health care cost problem, a problem that exists in both the private sector and in government. This is Nancy Folbre:

...Spending on Social Security, often treated as the greatest bugaboo of our aging society, has remained at 4.5 to 5 percent of G.D.P. since 1985. The already carried out transition to a higher retirement age is contributing to cost containment.

The scary increases in government spending have come in Medicaid and Medicare. These two programs, which consumed 1.2 percent of G.D.P. in 1975, reached 4.1 percent of G.D.P. in 2008.

These increases have less to do with government spending than with the increased costs of health care, regardless of who is paying the bill. ...

All government programs deserve critical scrutiny, and there is plenty of room for meaningful debate over the relative efficiency of public versus private provision. But there is no evidence that social spending in the United States is approaching some upper limit of feasibility.

What is unsustainable (or should be) is the current level of confusion, misinformation and paranoia about the future of the so-called welfare state.

The Slippery Slope for Health Care's Slippery Slope Opposition

Richard Thaler:

Slippery-Slope Logic, Applied to Health Care, by Richard Thaler, Commentary, NY Times: There are lots of important things to worry about these day... So it is important that we limit our worries to real as opposed to imaginary risks.

One pernicious category of imaginary risks involves ... dreaded “slippery slope” arguments. Such arguments are dangerous because they are popular, versatile and often convincing, yet completely fallacious. Worse, they are creeping into ... the Supreme Court ... deliberations on health care reform.

There is a DirecTV ad that humorously illustrates the basic form of the slippery-slope argument. A foreboding announcer intones a list of syllogisms that are enacted on screen: “When your cable company puts you on hold, you get angry. When you get angry, you go blow off steam. When you go blow off steam, accidents happen.” Later, we reach the finale: “You wake up in a roadside ditch. Don’t wake up in a roadside ditch.” ... The idea is that while Policy X may be acceptable, it will inevitably lead to the terrible Outcome Y... The problem is that such arguments are often made without any evidence that doing X makes Y more likely, much less inevitable. ...

Given how flimsy slippery-slope arguments can be, it is downright scary that they might play an important role in the Supreme Court decision on ... whether it is constitutional for the federal government to penalize people who fail to buy health insurance. ...

Consider these now-famous comments about broccoli from Justice Antonin G. Scalia during the oral arguments. “Everybody has to buy food sooner or later, so you define the market as food,” he said. “Therefore, everybody is in the market. Therefore, you can make people buy broccoli.” Showing remarkable restraint, he did not mention anything about ending up in a roadside ditch. ...

Please stop! The very fact that a slippery slope is being cited as grounds for declaring the law unconstitutional ... tells you all that you need to know about the argument’s validity. Can anyone imagine Congress passing a broccoli mandate law, much less the court allowing it to take effect? ... Surely, the justices have the conceptual resources to draw a distinction between the health care market and the market for broccoli. And even if they don’t, then all the briefs, the zillions of blog posts and a generation’s worth of economic literature can help them.

More generally, we would be better off as a society if we could collectively agree to ignore all slippery-slope arguments that aren’t accompanied by evidence that said slope exists. ...

Supreme Court Decision Tree

More here.

Paul Krugman: Broccoli and Bad Faith

The Supreme Court is undermining the public's confidence in its ability to stand above politics:

Broccoli and Bad Faith, by Paul Krugman, Commentary, NY Times: Nobody knows what the Supreme Court will decide with regard to the Affordable Care Act. But ... it seems quite possible that the court will strike down the “mandate” — the requirement that individuals purchase health insurance — and maybe the whole law. Removing the mandate would make the law much less workable, while striking down the whole thing would mean denying health coverage to 30 million or more Americans.

Given the stakes, one might have expected all the court’s members to be very careful... In reality, however,... antireform justices appeared to embrace any argument, no matter how flimsy, that they could use to kill reform.

Let’s start with the already famous exchange in which Justice Antonin Scalia compared the purchase of health insurance to the purchase of broccoli... That comparison horrified health care experts ... because health insurance is nothing like broccoli.

Why? When people choose not to buy broccoli, they don’t make broccoli unavailable to those who want it. But when people don’t buy health insurance until they get sick — which is what happens in the absence of a mandate — the resulting worsening of the risk pool makes insurance more expensive, and often unaffordable, for those who remain. As a result, unregulated health insurance basically doesn’t work, and never has.

There are at least two ways to address this reality... One is to tax everyone ... and use the money raised to provide health coverage. That’s what Medicare and Medicaid do. The other is to require that everyone buy insurance, while aiding those for whom this is a financial hardship.

Are these fundamentally different approaches? ... Here’s what Charles Fried — who was Ronald Reagan’s solicitor general — said..: “I’ve never understood why regulating by making people go buy something is somehow more intrusive than regulating by making them pay taxes and then giving it to them.” ... (By the way, another pet conservative project — private accounts to replace Social Security — relies on, yes, mandatory contributions from individuals.)

So has there been a real change in legal thinking here? Mr. Fried thinks that it’s just politics — and other discussions in the hearings strongly support that perception. ...

As I said, we don’t know how this will go. But it’s hard not to feel a sense of foreboding — and to worry that the nation’s already badly damaged faith in the Supreme Court’s ability to stand above politics is about to take another severe hit.

"Healthcare Jujitsu"

Not gonna happen:

Healthcare Jujitsu, by Robert Reich: Not surprisingly,... Supreme Court argument over the so-called “individual mandate” requiring everyone to buy health insurance revolved around epistemological niceties...

Behind this judicial foreplay is the brute political fact that if the Court decides the individual mandate is an unconstitutional extension of federal authority, the entire law starts unraveling.

But with a bit of political jujitsu, the President could turn any such defeat into a victory for a single-payer healthcare system – Medicare for all. Here’s how.

The dilemma at the heart of the new law is that it continues to depend on private health insurers, who have to make a profit... Yet the only way private insurers can afford to cover everyone with pre-existing health problems, as the new law requires, is to have every American buy health insurance – including young and healthier people who are unlikely to rack up large healthcare costs.

This dilemma is the product of political compromise. You’ll remember the Administration couldn’t get the votes for a single-payer system such as Medicare for all. It hardly tried. Not a single Republican would even agree to a bill giving Americans the option of buying into it. ...

Republicans have mastered the art of political jujitsu. Their strategy has been to demonize government and seek to privatize everything that might otherwise be a public program financed by tax dollars (see Paul Ryan’s plan for turning Medicare into vouchers). Then they go to court and argue that any mandatory purchase is unconstitutional because it exceeds the government’s authority.

Obama and the Democrats should do the reverse. If the Supreme Court strikes down the individual mandate in the new health law, private insurers will swarm Capitol Hill demanding that the law be amended to remove the requirement that they cover people with pre-existing conditions.

When this happens, Obama and the Democrats should say they’re willing to remove that requirement – but only if Medicare is available to all, financed by payroll taxes. If they did this the public will be behind them — as will the Supreme Court.

There other ways to forge a "policital compromise" besides this. I support a single payer solution, but I can't see how we get there from here without big changes in the political environment.

Moral Hazard and the Health Insurance Mandate

I want to return to the argument about the need for an individual mandate. A post earlier today talks about adverse selection problems in the health insurance market. These problems are driven by the fact that individuals know more about their health status than insurance companies. But there is another reason for insurance mandate as well, moral hazard (and avoiding externalities).

We are, I hope, a compassionate society, one that would not let an individual suffer severe health problems, perhaps even death, if treatment is available. In an emergency, we generally give the care that is needed and ask questions later.

This allows relatively healthy people to go without health insurance secure in the knowledge that if they get hit with a truly catastrophic and expensive to treat illness, society will take care of them. If we could make people pay the full cost of this wager that they won't need insurance, i.e. if society could turn it's back and say you made your choice, now live (or die) with it, a mandate wouldn't be needed. ut we can't (and I wouldn't want to live in a societ that could).

When it comes to Social Security we recognize that people can game the system in this way -- contribute nothing during their lives and rely on the fact that society will provide for them when they are old -- and we force them to contribute. That way, they build up their own retirement funds with a long series of small contributions and, at least in part, pay their own way. They have no choice but to do so. If this didn't happen, other members of society would have to pay this portion of the bill.

I don't see anything wrong with asking people to pay the expected value of their health care -- a mandate to get insurance to cover the catastrophic things that society would cover in any case -- to avoid this type of gaming of the system. Yes, it's true that many healthy people will pay, remain healthy, and seem to get nothing. But that's the wrong way to look at it. They have insurance whether they pay for it or not. Society will not let them die of a standard, treatable illness so insurance services are present. In fact, it's the knowledge that society is providing these services that motivates many people to take a chance and go without. So people are getting something, insurance services, in any case and those services are present whether or not you get sick. Just like fire insurance, the presence of insurance coverage has value to households even if they never use it. All society is doing with a mandate is asking people to pay for the health insurance services they receive rather than relying on others to pay the bill for them.

Paul Krugman: Hurray for Health Reform

Will health care reform survive its dishonest opponents?

Hurray for Health Reform, by Paul Krugman, Commentary, NY Times: It’s said that you can judge a man by the quality of his enemies. If the same principle applies to legislation, the Affordable Care Act — which ... for the most part has yet to take effect — sits in a place of high honor.

Now ... ObamaRomneycare ... isn’t easy to love, since it’s very much a compromise... Can such a system work? It’s already working! Massachusetts enacted a very similar reform ... while Mitt Romney was governor. Jonathan Gruber ... has surveyed the results — and finds that Romneycare is working pretty much as advertised. The number of people without insurance has dropped sharply, the quality of care hasn’t suffered, and the program’s cost has been very close to initial projections. ...

Given this evidence, what’s a virulent opponent of reform to do? The answer is, make stuff up.

We all know how the act’s proposal that Medicare evaluate medical procedures for effectiveness became, in the fevered imagination of the right, an evil plan to create death panels. And rest assured, this lie will be back in force once the general election campaign is in full swing.

For now, however, most of the disinformation involves claims about costs. Each new report from the Congressional Budget Office is touted as proof that the true cost of Obamacare is exploding, even when ... the document says on its very first page that projected costs have actually fallen slightly. Nor are we talking about random pundits making these false claims. We are, instead, talking about people like the chairman of the House Republican Policy Committee, who issued a completely fraudulent press release after the latest budget office report.

Because the truth does not, sad to say, always prevail, there is a real chance that these lies will succeed in killing health reform before it really gets started. And that would be an immense tragedy for America...

As I said, the reform is mainly aimed at Americans who fall through the cracks in our current system — an important goal... But what makes reform truly urgent is the fact that the cracks are rapidly getting wider, because fewer and fewer jobs come with health benefits; employment-based coverage actually declined even during the “Bush boom” of 2003 to 2007, and has plunged since.

What this means is that the Affordable Care Act is the only thing protecting us from an imminent surge in the number of Americans who can’t afford essential care. So this reform had better survive — because if it doesn’t, many Americans who need health care won’t.

Are Budget Problems Due to Rising Health Care Costs as Scary as We've Been Led to Believe?

Not too long ago, I sent the following email to several people I thought might have the answer:

Something that's been bugging me -- I don't know much about how they estimated future health care cost increases, but since that is largely behind the budget problems -- and hence the source of the ability to use the deficit for ideological purposes -- is there any reason to try and question these numbers? Do we really know what these will be 30 or 40 years from now?

I didn't get an answer.

We can't forecast very well beyond a 3 to 6 month horizon, yet we are relying upon projections for decades in the future as the basis for cutting social programs now. The CBO, for example, uses a 70 year projection for revenues and outlays, and that is the basis of a lot of the worry over the long-term budget picture. But, did we have any idea at all 70 years ago -- in 1942 -- what health care costs would be today?

Jeff Sachs takes up this issue:

Entitlements Hysteria, by Jeff Sachs: One of the unshakable myths of the punditariat is that the federal government is going bankrupt because of entitlements spending, especially spending on Medicare and Medicaid. Each day we hear the drumbeat saying that either we cut entitlements now or we are finished as a nation. This is a stampede of unreason, contradicted by the facts. ...

So what is the source of the hysteria? Some of it is simply propaganda, by those with the political agenda to gut the country's social safety net.

But there is something else. Confusion! The punditocracy is repeating the results of forecasts that indeed suggest calamity, but calamity in the late 21st century, not now. These long-term forecasts are arbitrary but have been repeated as an immutable fact by those who don't read the fine print. The most frequently quoted forecast is that of the Congressional Budget Office.

The CBO's long-term forecast assumes that health care costs will continue to rise steeply during the next 70 years, though at a diminishing rate. If healthcare costs continue to soar for decades to come, then yes, lo-and-behold, the government would eventually go broke. ...

Yet somehow I'm not ready to panic about the health care costs as of 2085. Mechanical extrapolations that assume that health care costs will rise much faster than GNP between 2011 and 2085 are utterly unconvincing. Why should healthcare costs continue to rise so far and fast when healthcare costs are already vastly over-priced now compared with what other countries pay for the same services? Why should we assume failure decade after decade to use the new information technologies to lower the costs of health-care delivery and administration?

In fact, the recent trends are mildly favorable. As J. D. Keinke of the American Enterprise Institute writes today in the Wall Street Journal, the idea of runaway health spending is a "myth" because "new data show that health spending over the past several years has been normalizing toward the rate of general inflation, rather than growing higher and higher, as had been the case almost continuously since the 1970s." ...

Even if we don't get all the way down to the lower costs that we should have, there is no reason to assume that health care costs will continue to soar year in and year out for another seven decades.

Let's therefore fight the right-wing hysteria demanding immediate and harsh cuts in Medicaid and other health outlays. We do not need to cut off the lifeline of the poor and elderly. We simply need to keep up the pressure against the healthcare lobbies, and resist the panic of the punditariat.