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Organ Markets

The NYT editorial board is concerned about the shortage of kidneys for transplants. As one might expect, the most obvious solution to the problem is automatically dismissed:

While some argue that the way to reduce the growing shortage is to pay living donors for kidneys, either in cash or government benefits, there are many ways to increase the supply without paying for human organs, which is prohibited by the 1984 National Organ Transplant Act and generally opposed by the World Health Organization.

Most of the NYT editorial focuses on technical issues (e.g., how to assure that organs are not wasted) but there is some limited attention to incentives. Some proposals are modest (e.g., covering the expenses incurred by live donors). But as the benefits increase (e.g., proposals for “a tax credit, college tuition, early access to Medicare or a contribution to a retirement fund”) the NYT’s enthusiasm disappears for a simple reason: these latter benefits “clearly have monetary value” which might induce the poor to sell organs.

I remain convinced that the best means of securing live organs for transplants would be the creation of markets. If two adults voluntarily consent a transaction (money for a live kidney—and a life is saved in the process—where is the harm? For extended development of the case for organ markets, see the citations at the end of this post.

Outside of live donations, one could get the incentives right by making organs for transplantation a club good available only to adults who have signed an organ donation card (and their minor dependents). Although such a system would work the best if universalized, one example of a group that has pushed forward more modestly on this front is LifeSharers (its advisory board includes Richard Epstein, David Henderson, and Alexander Tabarrock, among others; I am a member). Lifesharers members get priority access to organs from other members, in essence, jumping the cue that is filled with many who have never agreed to donate their organs.

Bottom line: in organ donations—as in so many areas of life—one can make remarkable progress if one gets the incentives right.

For a useful overview of the issue, see Alex Tabarrok, “Meat Market” (WSJ).

For an analysis of a functioning kidney market, see Nejamin E. Hippen “Organ Sales and Moral Travails” (Cato).

For an interesting analysis of the impact of monetary incentives, see Gary S. Becker and Julio Elias, “Introducing Incentives in the Market for Live and Cadaveric Organ Donations.”

 

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Market failure is often cited as a justification for policy intervention. However, one always faces the possibility that the costs of government failure may be greater than the costs of market failure. In the end, there must be a weighing of the costs and the benefits of policy. We witnessed a great example of government failure in the rollout of the Affordable Care Act, as the Obama administration responded to failures in the health care market by trying to create a “federally facilitated marketplace” (FFM). Yes, that is the term and, yes, it has an acronym.

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Today the Government Accountability Office released its report on Healthcare.gov (available here). As you might guess, the development of the website and supporting systems for the FFM were not cheap:

As of March 2014, CMS [Centers for Medicare & Medicaid Services] reported obligating $840 million for the development of Healthcare.gov and its supporting systems, over 88 percent of the federal total [$946 million].

The $150 million in cost overruns and the poor performance more generally stemmed, in part, from administrative problems in overseeing the development of a high complex system:

CMS undertook the development of Healthcare.gov and its related systems without effective planning or oversight practices, despite facing a number of challenges that increased both the level of risk and the need for oversight….CMS incurred significant cost increases, schedule slips, and delayed system functionality for the FFM and data hub systems due primarily to changing requirements that were exacerbated by oversight gaps. From September 2011 to February 2014, FFM obligations increased from $56 million to more than $209 million. Similarly, data hub obligations increased from $30 million to nearly $85 million. Because of unclear guidance and inconsistent oversight, there was confusion about who had the authority to approve contractor requests to expend funds for additional work. New requirements and changing CMS decisions also led to delays and wasted contractor efforts. Moreover, CMS delayed key governance reviews, moving an assessment of FFM readiness from March to September 2013—just weeks before the launch—and did not receive required approvals. As a result, CMS launched Healthcare.gov without verification that it met performance requirements.

The GAO report was prepared for a House Energy and Commerce Committee hearing on July 30th. According to the National Journal, “Rep. Fred Upton, the chairman of the Energy and Commerce Committee, noted that key pieces of the HealthCare.gov system—including the part that pays insurance companies—still haven’t been built.”

One can only guess that the final bill will greatly exceed anything anyone would have anticipated. And these are simply the costs of setting up the ACA Rube Goldberg machine. We have yet to see if it will work.

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Quote of the Day

Today we go back into the archives to find a quote that is every bit as timely today as it was when first issued. We will also play a game: name the author. The rules are simple. If you can identify the source, feel free to add it to the comments (no cheating).

I know about a health care system that has been highly successful in containing costs, yet provides excellent care. And the story of this system’s success provides a helpful corrective to anti-government ideology. For the government doesn’t just pay the bills in this system — it runs the hospitals and clinics… our very own Veterans Health Administration, whose success story is one of the best-kept secrets in the American policy debate

AND

The secret of its success is the fact that it’s a universal, integrated system. Because it covers all veterans, the system doesn’t need to employ legions of administrative staff to check patients’ coverage and demand payment from their insurance companies. Because it’s integrated, providing all forms of medical care, it has been able to take the lead in electronic record-keeping and other innovations that reduce costs, ensure effective treatment and help prevent medical errors.

Alright, if you need to cheat, you can find the entire quote and the identity of the author here.

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The Empirical Record

 

The Census Bureau is changing its annual survey, making it difficult to measure the impact of the Affordable Care Act. As the NYT reports:

 

An internal Census Bureau document said that the new questionnaire included a ‘total revision to health insurance questions” and, in a test last year, produced lower estimates of the uninsured. Thus, officials said, it will be difficult to say how much of any change is attributable to the Affordable Care Act and how much to the use of a new survey instrument.’

And

The questionnaire traditionally used by the Census Bureau provides an “inflated estimate of the uninsured” and is prone to “measurement errors,” said a working paper by statisticians and demographers at the agency. In the test last year, the percentage of people without health insurance was 10.6 percent when interviewers used the new questionnaire, compared with 12.5 percent using the old version. Researchers said that they had found a similar pattern in the data for different age, race and ethnic groups.

So, just to get things straight…the old questionnaire was acceptable when it overstated the magnitude of the problem. It is abandoned following reform so that it will be difficult to assess the impact of the Affordable Care Act against the historical data set. As Frederick Fleet might have said: “Didn’t see that one coming.”

Update: For an interesting piece on disappearing data, read Robert Samuelson (“Give Us Back Our Statistical Data”) in WaPo.

 

 

 

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Extensions

For those who failed to sign up for Obamacare, the administration has provided a list of 17 ways you can get an extension. Apparently the extensions will be granted on the honor system (check a box, and we will trust you). If none of the justifications for extensions apply, you may only have to wait a few days. As HHS explains: “Categories that warrant special enrollment periods may be added in the future if other appropriate circumstances, as determined by CMS, become known.”

Megan McArdle tries to make sense of the latest delay given that it appears that total signups will be close to the Congressional Budget Office’s projections of 6 million. The most troubling scenario: the Young Invincibles are not signing up.

here’s the really worrying scenario: The demographics haven’t budged, or have only barely improved from earlier months. The White House knows that means that big premium increases are in the offing for 2015, and they’re hoping to head them off at least temporarily with this delay. Extending open enrollment, which is essentially what they’re doing, would then be a desperate play to get more young, healthy customers into the exchanges, and perhaps to make it a bit harder for insurers to raise rates. In some states, insurers have to file preliminary rate increases in May. And thanks to this latest extension, they won’t have final data to back up any requests for a premium hike.

David Nathan and Susan Levine (Politico) have provided a brief history of Obamacare delays for those who would like to see the latest adjustments in context.  One can only assume that this history will need to be revised in the near future.

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Keep and Fix

Jonathan Chait has an interesting piece on the “keep and fix” solution for Obamacare (New York Magazine).  One of the more interesting points: the parts of the Affordable Care Act that people like the most are also the parts that are least widely recognized as being part of Obamacare. Example: 81 percent have a favorable view of closing the Medicare “doughnut hole” (part of the prescription drug program in Medicare Part D). Yet only 46 percent know that it is part of the Affordable Care Act.

In contrast, the parts of the ACA that are the least popular are the most widely recognized features of the Act. Thus, 40 percent support the individual mandate and 74 percent recognize that it is part of Obamacare.

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Given the low level of awareness of what is in the ACA, when polls reveal that a large percentage of Americans want to  “fix” Obamacare, it can be interpreted as a desire to jettison the individual mandate. The problem, is clear:

A “keep and fix” solution that polls well, then, would probably involve eliminating the individual mandate and keeping everything else. But the reason the mandate is there is because it’s hard to make the other parts work without it.”

Chait concludes:

The public likes keeping the parts of Obamacare where they get money, and opposes the parts where they pay money. In other words, Obamacare, politically, is becoming like just about every other government program.

Any surprises here?

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Any Surprises?

With midterm elections approaching, the White House has again delayed some of the more unpopular portions of the Affordable Care Act. As the NYT reports, the announced delays go much further than the earlier reprieves,

“essentially stalling for two more years one of the central tenets of the much-debated law, which was supposed to eliminate what White House officials called substandard insurance and junk policies.

The extension could help Democrats in tight midterm election races because it may avoid the cancellation of policies that would otherwise have occurred at the height of the political campaign season this fall.”

As Megan McArdle (who predicted this outcome months ago) concludes:

This is President Obama’s signature legislative achievement, the program for which he will be remembered. And he doesn’t have the courage to defend it, even when he is no longer facing re-election. If he won’t stand up for the hard choices his law requires, he can’t think that anyone else will either.

A few quick questions:

  • Why should the Republican Congress waste anymore time voting to repeal Obamacare (number 50 occurred this week) when the President seems quite capable of repealing it on his own through executive action?
  • How much of a law can a president delay and rewrite before someone begins to suspect that he has no intention to “take care that the laws be faithfully executed”?
  • What will keep a future administration from adopting the same tactics to delay implementation (forever)? One assumes there will always be another election on the horizon.

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