Category Archives: Health Care Reform

Obamacare Light

It seems the GOP finally has an Obamacare alternative.  That’s good I think, though it sounds like it does a poor job of expanding access relative Affordable Care Act of 2010.

I can’t help but think the impact will be further splinter Republicans.  I think many of the critics of Obamacare start with this chain of reasoning:

1. The US is God’s gift to the world

2. Nothing God makes if flawed

3. So the US is not flawed, or at least wasn’t before being corrupted by those Democrats

4. The US healthcare system is or was part of that unflawed whole, and is not flawed.

5. You can’t improve on God’s work, the US or its healthcare system.

6. Any attempt, like Obamacare, alternatives to it, or certainly more far reaching change, is blasphemy

Given this state of mind, how can an alternative Obamacare be anything other than the works of RINOs.

I think the party maybe split by this.

From the Daily Dish


The Big Question: Is there an alternative to Obamacare?


A health policy discussion with Booth colleagues Matthew Gentzkow and Matthew Notowidigdo.
The original is here at the Booth / Capital Ideas website. The other “big ideas” videos are really good.
My views expressed here are summed up a bit more eloquently in a recent WSJ Oped, here, and a longer essay “After the ACA” available here. More on health economics and insurance, including how individual insurance can protect against preexisting conditions on my webpage here, and by clicking the “health economics” link to the right.

The Big Question: Is there an alternative to Obamacare?
John H. Cochrane
Sun, 19 Jan 2014 15:26:00 GMT

Meaningless Sentence of the Day


This NY Times story on the middle class’s struggle with the new healthcare law is generally pretty good, but this sentence struck me as comically meaningless:

Experts consider health insurance unaffordable once it exceeds 10 percent of annual income.

What the heck does this mean?  The typical American spends more than a third of income on housing.  Does that make housing unaffordable?  Presumably not.  What makes 10 percent the magic threshold for health insurance but not for other categories of crucial spending?  Who are these experts, and what criterion do they use to determine what is affordable?
Probably what the sentence means is that people have become accustomed to spending less than 10 percent of income on health insurance and are unhappy when they have to spend more.  But if healthcare costs keep rising as a share of national income, as many economists believe they will, then we will have to adjust our perceptions of what is affordable.
Addendum: The Times story, particularly the graphic, suggests that the implicit marginal tax rate some people face under the Affordable Care Act subsidies can sometimes exceed 100 percent.  It is hard to believe that the law is so badly written as to have this feature, but that seems to be the implication.

Meaningless Sentence of the Day
Greg Mankiw
Sat, 21 Dec 2013 14:54:00 GMT

To avoid failure, the Affordable Care Act must evolve


By now, the potential consequences of too few young and healthy individuals participating in the new insurance marketplaces are well known. As Ross Douthat described,

[T]he law can work only if people who don’t necessarily benefit immediately from its provisions decide to participate anyway. If they respond to higher premiums by either staying out or dropping out, then Obamacare will be permanently unstable: the dollar figures, both for insurers and the government, simply won’t add up.

The participation of the young and healthy is supposed to be required, of course, by the individual mandate. But the mandate’s penalty is relatively modest and its enforcement mechanisms relatively weak, which means its power ultimately depends more on civic duty than on immediate self-interest.

The law’s advocates have explicitly acknowledged this point. Explaining the case for the mandate last month, The Atlantic’s Matt O’Brien allowed that “a rational self-maximizer” might decide to pay the fine instead of buying costly coverage. But “real people,” he argued, “aren’t rational self-maximizers … We don’t like to feel like we’re doing the wrong thing. We like to follow the rules instead. Feel like we’re a good person.”

That the viability of the new marketplaces rests on convincing people that it is their civic duty to purchase health insurance is a weak link. I expect it will break in some markets, though it’ll work well in many others. There may be too many people in some states who believe or are led to believe that going uninsured is just fine.

And, you know what? Provided it’s arrived at by honest means, I respect that choice. It’s not one I’d make for myself or my family at current health insurance prices, but I don’t think I should impose my view on others. It’s neither irrational nor immoral for others to judge current prices too high.

Though I support the Affordable Care Act (ACA), I have a great deal of trouble with the idea that people must purchase insurance. Not only am I not convinced of arguments to the contrary, the law doesn’t strongly support it. Yes, there is an “individual mandate,” but it’s well known what that really means: if you don’t enroll in a plan meeting certain requirements, you must pay a tax penalty, unless you meet one of the hardship exemptions. (I have no moral qualms about the government’s constitutional role to tax in this manner.)

Sure, you can call it a “mandate.” But it’s just a choice. Play or pay. Both are legal. Views differ on the extent to which each is moral or just. I choose to interpret them as both perfectly legitimate. Indeed, the whole setup is equivalent to a tax break for purchasers of insurance. No purchase, no tax break. Big whoop.

And yet, within the community rating/guaranteed issue framework, the non-participation by younger and healthier people imposes a cost on others. Premiums will go up. Markets may fail. Within a few years, we will face the question of what should be done about that. The answer is almost in the law itself.

ACA section 1332 establishes a new waiver program that allows the Secretaries of HHS and Treasury to waive certain provisions of the ACA in order to support state demonstrations. Section 1332 waivers — referred to in the law as “Waivers for State Innovation” — are available for plan years beginning on or after January 1, 2017. […]

In order to qualify for a waiver, a state’s proposal must be able to demonstrate that resulting coverage will be at least as comprehensive as coverage through a state health insurance exchange. Benefits must be as generous as those provided by qualified health plans through an exchange, and premiums and cost sharing must make coverage at least as affordable as that provided under the ACA. Furthermore, the state’s plan must be budget-neutral and must assure that a comparable number of residents will be covered.

This sounds promising, but I think a few states will balk at the idea that coverage must be at least as comprehensive as the ACA prescribes, with benefits at least as generous, etc. However, if some of these requirements were relaxed, many states that currently resist the ACA might be willing to implement a variant that is more broadly attractive to their residents.

Would that be so bad? I don’t think so. After all, what’s adequate, affordable coverage is subjective. Reasonable people can differ. And the alternative to a less generous, lower premium design may very well be a dysfunctional market, which is clearly worse.

Whether you believed it at the time of passage, reality may soon prove that the ACA is, in fact, too inflexible to meet the goals that motivated it. Universal access to adequate, affordable coverage (in some sense) best describes its chief aim. Though it’s still too early to tell for sure, I’m willing to bet that that aim cannot be achieved in some states unless the law evolves to permit them greater flexibility in design.



To avoid failure, the Affordable Care Act must evolve
Austin Frakt
Sat, 07 Dec 2013 23:00:00 GMT

Robert Graboyes: Enabling Supply-Side Innovation in Health Care

I generally like the thrust of this, but I’m not sure that market innovation will ever really address broader access to healhcare.  On the other hand, reduced costs will help the poor the most.


When my column “Don’t Believe Anyone Who Claims to Understand the Economics of Obamacare” appeared, Robert Graboyes sent me a link to his October 2, 2013 post in the Mercatus Center’s “McClatchy Tribune” blog also emphasizing the importance of innovation: “Paging Dr. Jobs.” (Here is a link to the article in the Dallas Morning News.) I liked it so much I asked to reprint it here. He kindly gave me permission. Here it is. One action Robert caused me to take is that I bought the Kindle edition of  “The Innovator’s Prescription” by Clayton Christensen, Jerome Grossman, and Jason Hwang.


American health care has no Steve Jobs or Bill Gates. No Jeff Bezos, Elon Musk, Burt Rutan, or Henry Ford. No innovator whose genius and sweat deliver the twin lightning bolts of cost-reduction and quality improvement across the broad landscape of health care. Why not? Either we answer that question soon and uncork the genie, or we consign our health care to a prolonged, unaffordable stagnation.

America leads the world in health-care innovation — but not the innovation that sends costs plunging and unleashes previously undreamed-of quality improvements. That kind of innovation occurs only in isolated pockets of health care. In the aggregate, health care spending rises rapidly and relentlessly.

If implemented as planned, the Affordable Care Act ensures the health-care industry will never have the flexibility it needs to generate a Steve Jobs. Tightly constricted, top-down micromanagement will deprive health care of the oxygen essential to attract and incentivize cost-cutting innovators. This suffocating environment predated the ACA, but the law worsens things considerably by tightly controlling providers, patients, and employers.

Unfortunately, advocates of decentralized, market-oriented approaches have never offered the electorate convincing alternatives to centralized, bureaucratic command and control.

If the ACA crumbles, market-oriented health care reformers have one more chance to articulate a vision. A quick Internet search already churns up chatter (some gleeful, some mournful) about replacing a failed ACA with a single-payer system. Decentralizers will need to formulate and articulate — quickly — why American health care never produces a Steve Jobs and how markets could usher in cost-cutting innovation. Importantly, their narratives would need to ring true to people who are not already persuaded that markets can function in health care.

To illustrate the conceptual and rhetorical rut we are in, imagine if people in early 1964 had discussed computers the way we in 2013 discuss health care. (At that time, computers were mostly room-size mainframes costing millions in 2013 dollars, at least). Discussing computers as we today discuss health care, all the parties in 1964 would agree there is a “computer crisis” — out-of-control prices, a widening gap between haves and have-nots. Only rich companies, they fret, can afford computers.

Some would offer an array of solutions: The government could become the sole manufacturer of mainframes. Alternatively, the government could become the sole purchaser of mainframes — using its great market clout to force IBM to sell its mainframes for, say, $950,000 rather than $1 million. Or the government could tightly regulate mainframe manufacturers — prohibiting them, say, from charging more than $900,000 for a computer.

Others, conversely, would argue that the answer to the hypothetical computer crisis is a more open market. We need more stores, they say, in which to buy mainframes. Mainframe stores in every shopping mall — and a greater capacity to buy and sell mainframes across state lines.

Apolitical business end-users would seek to band together in purchasing cooperatives — demanding as one that IBM moderate its mainframe prices.

Meanwhile, the industry would still be mainframes, mainframes, mainframes all the way down. No minis, micros, laptops, or smartphones. In fact, in our allegorical world of 1964, everyone would agree to laws and regulations and institutions that virtually forbid the emergence of a Steve Jobs or Bill Gates.

Let’s return, now, to 2013 and health care. To unleash innovators, we have to recognize what leashes them in the first place. Consider some candidates: Medicare’s reimbursement formula muffles prices and distorts resource allocation in ways that impact private insurance. Tax laws effectively bind employees to their employers’ health plans. State regulations protect insiders through scope-of-practice regulations, protectionist licensing, and certificate-of-need requirements. The structure of medical education (heavily influenced by state regulations) locks obsolete management practices in place. Tort law discourages heterodox innovation. Even more challenging, fixing one of these at a time may not do the trick.

Building the case for market solutions in health care, then, demands that market advocates think large. For inspiration, they should look beyond their usual array of reading sources. Cost-cutting innovation, also known as “disruptive innovation” is brilliantly described in “The Innovator’s Prescription” by Clayton Christensen, Jerome Grossman, and Jason Hwang.

A key insight from that literature is that cost-cutting innovation almost always comes from the supply side, not the demand side. It emerges from the protean genius of previously unknown people who see our wishes and hopes before we ourselves do. Tellingly, most of today’s policy prescriptions from the left, right, and center focus on the demand-side incentives. But the problem is that consumers can’t visualize what the disruptive innovations in health care will be — any more than they could have known in 1964 how the laptop, smartphone, and internet would soon restructure their lives.

Message to market enthusiasts: The clock is ticking. One more chance to get health care right may be in the offing. There’s no time to waste. And you had best learn to persuade those who don’t already agree with you.

Robert Graboyes: Enabling Supply-Side Innovation in Health Care
Wed, 16 Oct 2013 00:30:46 GMT

The deadlock/shutdown/debt ceiling

Among our fervent GOP friends should be consideration of this: if the affordable care act had not been enacted in 2010, and Obama had been defeated in 2012, but the senate remained in the Democrat’s hands, would they refrain from calling it blackmail if Harry Reid via senate procedure bottled up the budget, caused a government shutdown based on insistence that the ACA, seemingly a settled issue, be brought back from the grave before the government could go on with its business?  They will insist otherwise, I think, but only by being dishonest with themselves.

Basically, they’ve convinced themselves that the ending “Obamacare” is so important that the end justifies the means. Terms like hostage taking, terrorism, or I think suicide bombing best fit the GOP’s behavior at this point.  This mindset has already become dangerous, but with it now bleeding into the debt ceiling issue, the stakes and the dangers seem much grater.   I think we may weather a  failure to raise the debt ceiling better than the most alarmist claims, but I ‘d prefer not to test  if I’m right all the same.

U.S. Health Care vs. The World


The GW School of Public Health put together an interesting summarizing how the U.S. compares to selected countries on population, GDP, health care spending, life expectancy, and various other metrics.  Check it out.
US Health Care vs The World

Brought to you by: The George Washington University’s Online Masters in Public Health

U.S. Health Care vs. The World
Jason Shafrin
Sat, 07 Sep 2013 05:10:07 GMT

Yes, the Status of Health in the U.S. Is a Disaster. Why Do You Ask?


Screenshot 7 20 13 10 28 AM

Brendan Saloner:

U.S. Health Disadvantage is Not Inevitable: The United States fares worse than virtually every other rich country across a broad set of outcomes–babies in the United States are more likely to die at birth; teenagers are more likely to have unintended pregnancies, to be the victims of homicide, and to die in a car accident; and adults are more likely to experience diabetes, hypertension, heart disease, drug overdoses, and HIV….

With poor health outcomes spanning so many different domains (communicable, chronic, etc.) and age groups, it is not surprising that there is not a single causal factor that completely accounts for the disadvantage of the United States–it’s not just a lack of universal health care, greater economic inequality, higher child poverty, differences in lifestyle factors, racial diversity, a more libertarian culture, or weaker public health regulations–it’s probably a little bit of all of these things. It is notable for instance, that Americans are relatively disadvantaged even when considering non-minority whites with upper incomes and better education.

Should we despair? “American health disadvantage: it’s everything” is not a particularly good bumper sticker slogan, nor an apt slogan for a political campaign…. American health disadvantage is not inevitable and it’s not excusable. There are other roads that the United States could have taken over the last thirty years that would have led to very different outcomes, and there are still opportunities to get back onto a healthier path.

Yes, the Status of Health in the U.S. Is a Disaster. Why Do You Ask?
J. Bradford DeLong
Sat, 20 Jul 2013 17:31:17 GMT

Uwe E. Reinhardt: Americans Are Shocked, Just Shocked, Over Hospital Bills –

Uwe E. Reinhardt: Americans Are Shocked, Just Shocked, Over Hospital Bills –

Surprising candor at NYT on health care

I’ve supported Obama’s ACA, because I thought it got us off the dime on healthcare reform, it recognized the problem, rather than pretend the status quo is much better than it is.  I’m not so sure it was the best reform.  But it was better than what I thought the GOP would come up with which based on the experience of the 1990’s would ultimately be nothing or close to it.

This little item may illustrate at least one thing to consider as a change in direction of the ACA.   Should universal insurance be for largely catastrophic illness?  Maybe.

The one one drawback is that I think if we don’t make insurance a health package, the catastrophic costs may be overwhelming.  None the less I think this article raise question that should be considered as ‘Obamacare’ evolves.

The New York Times published a surprisingly sensible piece on health care on Sunday, “The health care benefits that cut your pay” by David Goldhill. A sample

We manage health care as if our needs were always urgent and unpredictable, ignoring how deeply this industry is integrated into our lives, with a vast amount of care now devoted to treating ongoing, chronic conditions.
Our system takes resources from all of us, pools the cost of certainties disguised as risks, extracts enormous costs of administration and complexity and then returns — to almost all of us — a fraction of the money we’ve put in.
Try to imagine what homeowners’ insurance would look like if we expected everyone’s house to burn down and then added coverage for each homeowner’s utility bills and furniture wear-and-tear. This would be insanely expensive without meaningfully reducing anyone’s risk. That, in short, is how health insurance works.
…Traditional health experts may repackage their ideas, but they are never discouraged by past failure. So the new Accountable Care Organizations are a reinvention of H.M.O.’s. The Independent Payment Advisory Board is the new Medicare Payment Advisory Commission, or MedPAC. Bundled payments are the new Prospective Payment System.
We often see some early benefit from the introduction of new ideas, but over time such initiatives are always subjugated by our system’s nefarious economic incentives. Implement cost control reforms and watch providers circumvent new rules and guidelines. Reduce reimbursement rates for procedures, and witness providers expand the definition of required services. Convert fee-for-service reimbursements into bundled payments, and soon more severe diagnoses are given. Attempt to use government buying power, and see providers turn to lobbyists to keep prices up. We are approaching a half-century of fighting this losing battle

Here’s a completely different idea, one that might actually work. Let’s give every American health insurance, but only for truly rare, major and unpredictable illnesses. In other words, let’s cover everyone but not everything. It would take a generation to transition fully to such a system, but eventually the most routine and expected medical treatments, from checkups and minor illnesses all the way to common chronic conditions and expected end-of-life care, would be funded from our individual health savings; only the most major needs — for example, cancer, stroke and trauma — would be paid out of insurance.
Defining insurable events more narrowly and enabling Americans to use the premium savings to build health savings would reduce the distortions inherent in our insurance approach. Most importantly, it will also compel providers to compete on the basis of price, quality and service, as they meet the one force that creates real incentives for good performance, innovation and safety: the consumer.

Sheer poetry, in few words accomplishing what took me many pages of “After the ACA.”  Newspapers often publish contrary views to show they are balanced (or so a WSJ editor once told me when I complained!) But that this can even get aired at the Times is pretty remarkable.

Surprising candor at NYT on health care
John H. Cochrane
Mon, 18 Feb 2013 00:40:00 GMT