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Archive for June, 2012

Mike Munger, Duke political scientist and sometime Libertarian Party of North Carolina gubernatorial candidate, explains his support for single-payer health insurance:

I would prefer personal responsibility, and a competitive market in health care. Modeled after the very successful, constantly cheaper, constantly better quality, service in Lasik surgery and other “elective” surgeries. If someone, anyone, would even consider going in that direction, that would be fine.

Insurance would be for major problems, big surgeries, accidents. You might have an annual deductible of $5k or more. Doctors would advertise prices (yes, PRICES) of standard surgeries.

Does any of that sound familiar? I didn’t think so. Instead, we have something really bad. Single payer would be better than what we have. Single payer is also better than ACA, by the way, which is why I am not happy about the decision yesterday.

What we have is this…

Click through for the rest. I’m not persuaded by the claim that single-payer is better than what we have now, but I think it might be better than what the PPACA sets up. The fact is that in unregulated states (no community rating or guaranteed issue, elimination riders permitted, low mandated benefits), health insurance is pretty cheap for healthy people, and states are increasingly experimenting with allowing nurse practitioners and dental hygienists to practice independently, making less than half of their respective top-level professional equivalents and presumably passing along the savings to us. The problem is that in unregulated states, unhealthy people can’t get coverage. At all. There are tools that insurance companies can use to make coverage reasonably achievable even for the unhealthy, like elimination riders, but there is strong social pressure against their use. As a result, insurance companies would rather deny coverage to a high risk than offer coverage with exclusions. It looks bad to people to do the second. It makes no sense, but it’s a good case study of how social pressure can influence markets just as much as law and policy. And yes, mandated ER care is a problem, but uncompensated ER care is something around $50 billion a year – not a huge enough number to be driving cost inflation. Finally, the employer health insurance deduction probably means that the employed are over-insured, but the fact is that people want low-deductible, expensive, gold-plated health insurance. Some of the rise in health care costs is being driven by the market. People are willing to pay high prices even for a very small marginal benefit in treatment technology. Single-payer would probably drive down costs, at the expense of a small amount of quality – but people put tremendous value on that small amount of quality, and thus the welfare losses would stand to be huge.

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I am working on a book on socialism this summer, and my preparations for it have led me to read quite a bit of interesting material. Here are a few noteworthy titles, in no particular order:

1. How Much is Enough? Money and the Good Life, by Robert and Edward Skidelsky (New York: Other Press, 2012). They press an old—very old—objection to capitalism, namely, that it unleashes and even encourages base motives and unbecoming goals. They claim in particular that capitalism has two kinds of “defects”: the first, the “moral defects,” are that it “relies on the motives of greed and acquisitiveness, which are morally repugnant,” and it allows the “coexistence of great wealth and great poverty,” which “offends our sense of justice.” The second kind are “capitalism’s palpable economic defects,” which are that it “is inherently unstable,” as well as “inefficient, wasteful and painful” (pp. 5-6). “We know,” they assert, “prior to anything scientists or statisticians can tell us, that the unending pursuit of wealth is madness” (8). The book contains some interesting history of both objections to and defenses of capitalism, and it does a good job rehearsing some standard objections; its treatment of the connection between happiness and wealth, for example, is particularly well done. Its treatment of the alleged injustice of capitalism is frustratingly cursory, however—the authors seem to believe it is self-evident that inequality is bad per se, and thus give little further discussion—and they, like many other commentators, are guilty of assuming that their schedule of values is the one everyone should have. Still, if the simple life of yesteryear, with a vision of tranquility and contentment, appeals to you, then this book might as well.

2. What Money Can’t Buy: The Moral Limits of Markets, by Michael J. Sandel (New York: Farrar, Straus and Giroux, 2012). I had high hopes for this book. Its author is an eminent philosopher at Harvard who has done important and careful work, and the putative topic—namely, that not all aspects of human social life should function like markets—is one to which I was already sympathetic. But this book ultimately disappoints. The level of argument is too often superficial, and the points he makes are often gratuitous. He refers repeatedly, for example, to something he calls “market triumphalism,” which he apparently thinks is what drives most of American politics, economics, and culture. Yet his evidence for this is only anecdotal, and it does not coalesce into a clear notion of exactly what this “market triumphalism” is supposed to be. Criticism of free markets and capitalism have not exactly been absent over the last thirty years (the time frame Sandel mainly discusses), and it is at least arguable that governments at all levels—local, state, and federal—have expanded, not contracted, their reaches during that time. Sandel finds “distasteful” many things that people are willing to pay for (as do I, even if his and my preferences do not exactly coincide), but nothing follows from that—certainly not any particular political policy. He doesn’t like that people pay others to stand in lines for them, for example; well, okay, but so what? He also does not like that people often consider things like tradeoffs and opportunity costs when making decisions; he thinks that means that the market is “crowding out” other motives. But some, like Pete Boettke for example,might argue that that is simply the “economic way of thinking”—and we could use a lot more of it. A more systematic presentation of Sandel’s position, along with a more careful defense of it, could, I think, have made this book much more powerful.

3. The Price of Inequality: How Today’s Divided Society Endangers Our Future, by Joseph E. Stiglitz (New York: Norton, 2012). I have not finished reading this book yet, so I will reserve final judgment until I do. I can say, however, that it is a bit surprising to discover a Nobel Prize-winning economist so thoroughly distrustful of markets and so thoroughly trusting of government regulation. At times it seems that he thinks that if we would just put people like him in charge of “running the economy,” things would go so much more smoothly. One aspect of his argument is a reprise of Charles Murray’s main point in his recent book, Coming Apart, namely that there are growing cultural divides in America that threaten to have serious repercussions in the not-too-distant future. Stiglitz’s contribution to this discussion is to claim that these divides are primarily the result of bad economic policy, as opposed to various other factors like politics, culture, demographics, etc. Stiglitz also treats too lightly the inequality-entails-unfairness claim, seeming to believe that merely pointing out that a set of institutions allows inequality is enough by itself to condemn it. But perhaps Stiglitz deepens the discussion of this point in the latter parts of the book. If so, I will make the proper notice.

There are several other books on my list, including works by Fr. Robert Sirico, Peter Boettke, Alan Kahan, Allan Meltzer, Tyler Beck Goodspeed, and by Nicholas Capaldi and Theodore Roosevelt Malloch. Perhaps I can write mini-reviews of them in future posts.

In the meantime, are there other books or articles I should be reading? I would be most grateful for suggestions.

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Consider the following two policy options:

  • Option A: You are required to buy health insurance.  If you do not, you must pay a penalty of X dollars.
  • Option B: Everyone’s taxes are raised by X dollars.  If you have health insurance, you get a tax rebate of X dollars.

How are these options different? In simple economic terms, they are functionally equivalent.  The only significant difference is that under option A, the non-insured are effectively lawbreakers.  Under option B, they are not.  Being a classified as a lawbreaker may have a range of implications on a person’s later life.

In recent months, many people have gotten all worked up about the mandate aspect of Option A.  But if you are someone who would not be insured otherwise, both options A and B have the effect of either mandating that you pay X dollars to the government or mandating that you buy insurance.  Both policy options are mandates that are, in dollar terms, equivalent (though A has the additional stigma of being a lawbreaker).

I see no reason to get any more worked up by the mandate in option A than the mandate in option B.  And the problem is those with an anti-mandate fetish get diverted from focusing on issues that really matter, such as the fact that ObamaCare is lousy policy for so many other reasons besides the mandate (which actually has some upsides as well).

Now we have Chief Justice saying that, since the two options are functionally equivalent, we might as well call them both taxes.  He understands the equivalence between options but does not seem to understand the larger implications of his decision.  In an attempt to preserve some limited scope for the commerce clause, he has essentially rendered it superfluous.  If everything can be cast as a tax (which a clever economist can always do), and government’s power to tax is unconstrained, then the commerce clause is irrelevant.

Which brings us to the question of real import: what should the government do in terms of changing the provision of health insurance?  That is what the debate should be over, not what type of policy tool the government uses to coerce us to pay for it.

Addendum: Richard Epstein summarizes things nicely (as usual): “Chief Justice Roberts has ignored this fundamental principle: If direct regulation is beyond the scope of the Commerce Clause (as he held), then taxation as an indirect route to the same regulation should be off limits as well (as he failed to hold). This is a baby that should not be split. His attempt to do so undermines his ruling, the court and the Constitution.”

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First, for most Americans the amount due will be far less than the price of insurance, and, by statute, it can never be more. It may often be a reasonable financial decision to make the payment rather than purchase insurance . . .

Indeed, it is estimated that four million people each year will choose to pay the IRS rather than buy insurance. See Congressional Budget Office, supra, at 71. We would expect Congress to be troubled by that prospect if such conduct were unlawful. That Congress apparently regards such extensive failure to comply with the mandate as tolerable suggests that Congress did not think it was creating four million outlaws. It suggests instead that the shared responsibility payment merely imposes a tax citizens may lawfully choose to pay in lieu of buying health insurance.

So the tax is acceptable, in part, because it is trivial.

Imagine, for the sake of argument, you accept the basic position that it is the state’s responsibility to provide universal health care coverage.

The problem: to the extent that the tax is trivial, it will be ineffective. That is, it would be quite rational—as recognized by Roberts—for an individual to pay a small tax and avoid large premiums.  It would be rational, once again, to do this up to the moment when one would require serious medical attention, at which point the ACA limits the amount that can be charged for entry into the system and prohibits discrimination based on pre-existing conditions.

The ACA—by design or by accident—seemed to neglect this issue.

Another point: while one might have little concern over those who make a rational decision not to purchase insurance, one might have a far different response to those who want insurance but simply do not have the wherewithal to purchase it. These were the folks who might have been covered by the expansion of Medicaid. Now that states cannot be punished for refusing to extend Medicaid as required under the ACA, I am assuming many (most) states will not provide additional coverage.

Yes, the Court upheld the ACA. But was it really more than a short-term victory for those who believe that the state has an obligation to provide universal health care coverage?

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The Supreme Court’s decision to uphold the Affordable Care Act (don’t call it “Obamacare”!) gives me a great sigh of relief. Although I was one of those who thought it well-nigh impossible to be overturned when the lawsuits were initially filed, over the last several months I began to think that there was actually a chance it could happen. I must say I am enormously relieved that the ACA will remain the law of the land.

The primary reason for my relief is that my health care bills are big, and getting bigger. And as I age, I expect they will continue to go up, as I will need various tests, procedures, medications, and so on. These are expensive! And I really believe that I have been having to pay too high a proportion of those costs myself. I do not ask to get sick, so why should I have to shoulder the entire burden of the costs of my illnesses?

The so-called individual mandate is absolutely necessary to the functioning of ACA. Remember, “affordable” is the first word in its name—and affordability could not be accomplished if younger and healthier people were not required to pay for insurance that they would not use. We assume they will consume less in health benefits than they will pay, which means that the remainder will go to pay for people like me who are the reverse—consuming more than we pay for. Without the individual mandate, many of those younger and healthier people would simply have not bought insurance, because they (selfishly) would have seen it as a bad bargain; but that would have meant that there would not be the funds to pay for others’ health care.

Now, however, they will be required to pay, which means I, like millions of others like me, won’t have to pay as much for my own care. That does mean, I concede, that we are effectively using others to serve our own ends. By not allowing those younger and healthier people the chance to give or withhold their voluntary consent, a Kantian might say we are violating their rational autonomy, their moral agency, their ‘personhood’—using them merely as a means to our own ends, thus violating the Categorical Imperative of morality. But that is far too extreme and restrictive a standard. Sometimes social justice requires violating others’ “rational autonomy” just a bit, especially when others benefit so much from it.

Now it is true that among those younger and healthier who will now be paying for my and others’ health care benefits are my own children. And because they are my children, I do worry about the financial burden that is now placed on them to pay the trillions of dollars this will cost (in addition, of course, to the trillions of dollars in national debt we already have that will also be their burden). But they are still young enough that they don’t really notice it at the moment. And, in any case, I have sacrificed a lot for them, so why shouldn’t they sacrifice for me? Plus, they have been irritating me recently anyway, so I’m not exactly inclined to “put the children first,” if you know what I mean. When it comes time for them to pay these bills, let them figure out a way to do it. Maybe they can put it off on their children.

A perhaps surprising benefit of the ACA is that it makes me care much more about my fellow Americans, especially those younger and healthier ones. I may not care about them as so-called rationally autonomous moral agents, but now I do very much care about them as laborers generating the wealth that will fund my health care. They need to keep working, and I am really concerned about their ability, and willingness, to do so. So I will be thinking about them a lot, and I will be most interested to make sure that Secretary Sibelius adopts appropriate measures to ensure that their willingness to keep working hard does not flag.

This, then, is a great day for our social democracy. The nineteenth-century economist Frédéric Bastiat once wrote that under any government, there are only three possibilities: (1) the few plunder the many, (2) everybody plunders everybody, and (3) nobody plunders anybody. Although Bastiat argued for option (3), that was a pretty extreme position. It wasn’t very practical, and it was also extremely limiting as to what the government could do. The ACA is more like option (1), which, for those of us among the “few,” is clearly the best option.

As it happens, just this week my family and I have been struggling with some relatively difficult health care decisions. Cost was one large part of our considerations. Thanks to President Obama and the ACA, however, cost will soon be a much smaller factor in the health care decisions we make. Also, soon we won’t have to worry about difficult decisions like which tests or procedures to have, or which medications to take. Not only will the costs be borne by others, but the hard decisions will be made by others too. I don’t know who those “others” will be, but another underappreciated aspect of the ACA is that it doesn’t matter—I don’t have to know who they are. Just as long as it’s not me!

If you are my age or older, then, I hope you will join me in celebrating this day. If you are younger, I hope you will come to appreciate how important you are to me and those like me. We need you, now more than ever! The ACA will now give you a chance to really do your patriotic and moral duty. Remember, sacrifice is always involved when doing one’s duty. So if you find your patriotism wavering in the future, just keep in mind that you are doing your part to keep America strong!

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Markets fall after ObamaCare ruling?

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Huh?  Orin Kerr at VC notes this about That Man in the Supreme Court’s thinking:

If I am reading the Chief Justice’s opinion correctly, the upshot is that real economic mandates are beyond the power of Congress. Congress can’t force action where there was none. The individual mandate is constitutional because despite the name, it’s not really a mandate. It’s called a mandate, but in practice it’s really just a small tax, and the enforcement mechanism is pretty light. So Congress lacks the power to say that you go to jail if you don’t buy health insurance. But Congress has the power to encourage you to get health insurance by imposing a tax if you don’t, as long as the tax isn’t so coercive that it’s really more than just a tax. (emphasis added)

What happens when you refuse to pay a tax?  Can’t you ultimately be sent to jail?  Is the IRS coming after you really not “so coercive”?

This ruling on the tax smells to high heaven.

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