A Net Gain?

Would anyone care to take up Megan McArdle’s gauntlet, thrown down at Bloomberg View, at to whether the Affordable Care Act has been a net gain?

There’s a new paper out looking at how the Affordable Care Act has transformed health-care access, and in turn, what that has done for health. The authors’ first answer probably won’t surprise you: when millions more people became insured, more got checkups and primary care doctors. But it’s not obvious that these people got any healthier. As the paper puts it: “No statistically significant effects on risky behaviors or self-assessed health emerge for the full sample.”

Other studies have found substantial effects on self-assessed health, but on the harder markers of health — like blood sugar, cholesterol and blood pressure — the famous Oregon Medicaid Study found no significant improvement when government gave people health care.

It turns out the link between “health care” and “health” is not as close as we would like. Health insurance is not magic. Insurance can give you access to a doctor, but it cannot make you take your medicine. An absolutely astonishing percentage of people don’t take their hypertension medication, even though the side effects are minimal, the medications are cheap generics, and the benefits are large; overall, about 50 percent of patients seem to fail to take their medicine as recommended. Insurance cannot make you stop drinking or smoking or overeating. Just ask the primary-care physicians charged with bullying people out of those behaviors. Yes, people with health insurance are more likely to be healthy. But people with good health insurance are also more likely to be successful folks who are remuneratively employed, which seems to be independently correlated with health, even when everyone is getting their health care through Britain’s National Health Service.

Even as some people use health insurance to get their blood pressure down or their lung disease treated, others will fail to comply with treatment regimens, or will get treatments that turn out in hindsight to have been a bad idea, or will spend money on unhealthy things now that they’re spending less on health care. Which effect ends up being larger in aggregate is an empirical question, even though individuals may be able to point to a very clear benefit or detriment to themselves.

That empirical answer ends up being … kind of cloudy. Some studies show large health benefits from health insurance, others little, none, or even negative effects.

Politically, it doesn’t matter whether it’s a net gain. It benefits some people and they’ll defend it to the death as will those who like the PPACA for political reasons.

My own concerns about the PPACA had nothing to do with whether it was a net gain or not but that it did little to address the issues we need to resolve so desperately or even sets the stage for addressing them in the future.

But back to her question. Make your case that the Affordable Care Act was a net gain or a net loss.

1 comment

Lost in a Masquerade

I think that I must be less favorably disposed towards mercantilism masquerading as free trade than George Friedman is. In his post at Mauldin Economics he laments letting the mask drop:

In the last G-20 meeting, its members agreed to drop the forum’s commitment to free trade at the insistence of the United States. That agreement was reached at one meeting and was contained in a single document—such agreements and documents are far from written in stone.

In spite of that, it must be regarded as a historical moment. Excluding the free trade commitment from the agreement marks a fundamental shift in a concept that has been central to global economics for more than a generation.

As the late Mayor Daley used to say, let’s look at the record. To the best of my knowledge no country has completely free trade. There are fewer impediments to any other country selling its products or services in the United States with the possible exception of goods that we euphemistically deem to be violations of our intellectual property laws than there are in most countries.

All of our major trading partners on the other hand have substantial barriers to the import and sales of U. S. goods and services within their borders, not limited to duties, quotas, and subsidies. Suggesting that we might do the same is just acknowledging reality.

The reality for the U. S. is that while trade may have boosted GDP a little, median income has remained frustratingly stable while the average income has risen sharply. That’s just another way of saying that a few people have benefited greatly by trade while most of us haven’t benefited at all and some of us have been gravely injured.

The trade regime I support is reciprocity. China or Japan can impose tariffs as high as they care to or impose quotas or provide subsidies to their hearts’ content, secure in the knowledge that we’ll take the same actions against their goods and services. That will hurt the Walton family but you’ll start to notice more neighbors who are employed making things than you used to.

5 comments

The Real Reason Capitalism Can’t Fix Health Care

While I agree with Cullen Roche’s headline conclusion, I disagree with his reasoning:

Let’s say we have two pools of people – the Healthcare Heads and the Healthy Heads. The Healthcare Heads are mostly older people and they need the healthcare system a lot. The Healthy Heads are mostly young people who need routine check-ups and basic coverage. Then we have two healthcare providers called Healthy McHealth Provider and McDonalds (not to be confused with the hamburger company) who offer two plans for these pools to compete over. The first plan is called the Hennessey Healthcare Plan and the second plan is called the Honda Healthcare Plan. As its name implies, the Hennessey Plan, named after one of the most awesome (and expensive) cars ever made, has all the best bells and whistles. The Honda plan is just, well, like a Honda. It’s nice, but you’re gonna have to pay extra if you want that CAT scan.

The reasons that “capitalism” (the market system) can’t fix health care are that:

  1. People want care not insurance.
  2. The cost of insurance is proportional to the cost of care.
  3. As long as the cost of care goes up, the cost of insurance will, too, regardless of how insurance is structured.
  4. If you constrain the supply and subsidize the demand, costs will inevitably rise.
  5. If you want competent practitioners, you’ve got to constrain the supply.
  6. If you don’t want anybody to go without the care he or she needs, you’ve got to subsidize demand.
28 comments

What Does Congress Do?

  1. Get re-elected.
  2. Posture.
  3. Otherwise do as little as possible.
  4. Get paid a handsome salary for it.

What’s not to like?

6 comments

My Weekend in Atlanta

Last weekend I attended a family function in Atlanta last weekend—one of my nieces got married. The event was lovely. It took place at the Wheeler House and, consistent with my niece’s character, every detail was executed nearly flawlessly.

I hadn’t spent any time in Atlanta in decades and it’s grown over the years—many more tall buildings in the downtown area. I didn’t have much time for sightseeing. I did get some good barbecue.

I didn’t have much of an Internet connection and barely glanced at it. Hence my lack of posting.

9 comments

Long Term Thinking

Walter Russell Mead urges Republicans to think in the longer term:

The Republicans have fallen into a trap. The problem with American healthcare isn’t the way it is paid for, at least not in the short term. The problem is that our bloated system is too inefficient so that it costs too much no matter how we pay for it.

Thus, healthcare policy has to involve two things: A short-term system to help people navigate the current disaster, and a plan to make the system sustainable over time. Obamacare “repeal” should be about temporary reform of the worst features of the law—especially regulations that are unnecessarily cementing bad things into the system.

The long-term cost problem wasn’t created by Obamacare, and it won’t be undone in a single piece of improvised legislation keeps the law’s structure but makes the taxes and transfers less progressive.

In national politics two years ahead is long term thinking. It brings to mind what a boss of mine once said: “If I start engaging in that kind of long term thinking, next month there will be somebody else at this desk thinking in the short term.”

36 comments

The Most Important Thing

As I read John Gray’s reaction at NewStatesman to the terror attack in London the other day, it reminded me of a line from a play. Was it Cactus Flower? “The most important thing in the world to me is freedom. After I’ve eaten.”

Mr. Gray speculates that in the United Kingdom at least attention is turning to the “primary function” of government—providing security:

The ideal liberal order that was supposedly emerging in Europe is history. The task of defending public safety has devolved to national governments – the only institutions with the ability to protect their citizens.

The progressive narrative in which freedom is advancing throughout the world has left liberal societies unaware of their fragility. Overthrowing despots in the name of freedom, we have ended up facing a situation in which our own freedom is at stake. According to the liberal catechism, freedom is a sacred value, indivisible and overriding, which cannot be compromised. Grandiose theories of human rights have asserted that stringent limitations on state power are a universal requirement of justice. That endemic anarchy can be a more intractable obstacle to civilised existence than many kinds of despotism has been disregarded and passed over as too disturbing to dwell on.

I can’t speculate on how Germany, Belgium, or the United Kingdom will deal with their security problems. They should respond in the ways that are culturally and politically consistent with their own needs.

Here in the United States we face challenges of our own. We can keep foreigners out but, increasingly, Islamist terrorist attacks aren’t being perpetrated by foreigners. The idea that any foreseeable increases in federal, state, and local governments’ use of force will actually make us safer is far-fetched.

Another line that comes to mind, this one from Casablanca: “… there are certain sections of New York, Major, that I wouldn’t advise you to try to invade.” Our society and our problems are different so our solutions will inevitably be different.

2 comments

It’s Not Re-Branding

I have to admit that I’m skeptical about Colin P. Clarke’s conclusion in his post at the RAND Blog on the continuingly changing face of Al Qaeda in Syria:

Six years into the conflict in Syria, al Qaeda’s presence in the country has never been stronger. And while most dismiss the notion of al Qaeda as a political entity in Syria, the same was said 30 years ago about Hezbollah — the Shia group that now holds seats in Lebanon’s parliament and maintains a vast military wing. If jihadist groups linked to al Qaeda in Syria can succeed in rebranding themselves, they can take steps toward positioning themselves as political players if or when negotiations to end the civil war in Syria gain traction.

To my eye treating Middle Eastern Islamist groups as though they were Western corporations is just as misleading as Orientalism. Let’s try another analogy. What if, rather than “rebranding” themselves as a strategem, is it possible that many of these Islamist groups are familial or tribal in nature and the dizzying variety of organizations and names just represents larger groups fracturing along lines of family, clan, or tribe?

1 comment

The Power of Lowered Expectations

There’s a snippet from Hassan Hakimians’s post at Project Syndiate considering why economists did not predict the “Arab Spring” that I found very intriguing:

According to the American sociologist James C. Davies’s so-called J-curve theory, revolutions – such as the Russian Revolution of 1917 and Egypt’s revolution of 1952 – occur when periods of prolonged economic and social development are sharply and suddenly reversed. In other words, it is not straightforward economic hardship, but rather frustration with the disparity between expectation and reality that awakens the masses.

And people wonder why I’m worried about the United States.

9 comments

This Sounds Good to Me

The editors at Bloomberg point out a good feature in the Republican tax reform plan—treating debt and equity the same for the purposes of taxation. I’ll let them explain it:

One of the biggest defects in the U.S. tax code is that it encourages companies to finance themselves by borrowing rather than by issuing equity. Correcting this bias should be a top priority for President Donald Trump and Republicans in Congress as they merge their plans for tax reform.

The tax preference for debt over equity is neither new nor confined to the U.S., but that doesn’t make it good policy. Many governments treat interest on debt as a deductible expense, so payments to creditors don’t get taxed while payments to shareholders do. This tilting of incentives has no good justification and can be dangerous.

Highly leveraged enterprises are much more likely to fail in an economic downturn. This fragility is what turns isolated asset bubbles into major catastrophes. It’s why the subprime boom of the 2000s, financed largely with credit, was so much more damaging than the equity-fueled dot-com craze of the 1990s.

While the best approach would be to eliminate the corporate income tax entirely, if you’re going to maintain a corporate tax system (which appears to be a political necessity), allow companies to deduct the equity issued as an expense.

That sounds good to me but I’m no expert on corporate finance and would appreciate any commentary by people who are.

3 comments