Tuesday, November 18, 2014

Professor Krugman continues to misinform readers about Romneycare


Get the economics of Obamacare and Romneycare from Side Effects: The Economic Consequences of the Health Reform.  Especially Chapter 10, entitled "Romneycare times Eleven":

Overall, the ACA erodes nationwide average work incentives about eleven times more than Romneycare did in the state of Massachusetts . Table 10.1 is a good summary of why the differences are so dramatic: the amounts involved and the fraction of the potential workforce presented with a new income or employment tax as a consequence of health reform.
The primary difference between Romneycare and ACA employer penalties is the nominal amount: $ 295 versus $ 2,000 (plus health cost inflation), respectively. Also significant are the facts that the ACA penalty is not business-tax-deductible and that Massachusetts employers are especially likely to offer health insurance even without a penalty.
The subsidized coverage in Massachusetts has barriers to participation that are absent from the ACA and thereby make Romneycare’s implicit [full-time employment tax] less significant. Romneycare came after other permanent forms of assistance for Massachusetts workers leaving [jobs with health coverage], whereas, before the ACA, the federal government had no significant and permanent program for assisting nonelderly nonpoor adults with health insurance while they are not working. Accounting for the prevalence of various taxes, I find that the ACA’s implicit income tax (not shown in Table 10.1) is about eleven times greater than Romneycare’s.

I give the CBO a lot of credit on this. Unlike Professor Krugman, the CBO never fell into the trap of saying that Romneycare= Obamacare, therefore Obamacare has no noticeable effect on the labor market (CBO 2012).

Updated. I answer commenter Veritas with the excerpt below from Chapter 10 of Side Effects.

[The] federal government helped pay for much of Romneycare, whereas the ACA does not turn to any higher power for funding. ...Romneycare encouraged employers in the state to help employees use pre-tax dollars to pay for health insurance, which means that the U.S. Treasury would be passively assisting employees in the form of reduced personal income and payroll tax receipts from Massachusetts. The state also had federal money that was attached to a Medicaid waiver from the federal Department of Health and Human Services (Powell 2012). Thus one should not assume that Romneycare would be elevating Massachusetts labor income tax rates to [the] levels [needed when federal governments expand coverage],

I believe that Professor Gruber videos refer to the Medicaid waiver but, as my excerpt notes, Romneycare had even more federal funding than that.


Saturday, November 15, 2014

CSPAN covers economic impact



At the 4:58 mark, Dr. Aaron acknowledges that "there is a tradeoff." That was a big surprise to me, because Dr. Aaron was the lead signatory on the economists' letter to Congress saying that there is no tradeoff: the ACA both helps people and grows the economy.

Friday, November 14, 2014

Private and Public Comments on Health Cost Growth

Once upon a time, it was acknowledged in academic circles that the ACA did little to cut the growth rate of health care costs. See, for example, 24:05 and following in this video:


But then in this economists' letter to Congress and the American public, the same parties are claiming that the effect of the ACA on health care cost growth is so tremendous (in the direction of less cost) that it would create up to 400,000 jobs EVERY YEAR!

Another (unrelated and) excessively truthful part of this video starts just before the 24:00 mark "The American public doesn't actually care that much about the uninsured.  ...A lot of the uninsured don't care about the uninsured."


Wednesday, November 12, 2014

Leveraging a Lack of Economic Understanding

Anticipated here (italics added): 
A job, Mr. Mulligan explains, "is a transaction between buyers and sellers. When a transaction doesn't happen, it doesn't happen. We know that it doesn't matter on which side of the market you put the disincentives, the results are the same. . . . In this case you're putting an implicit tax on work for households, and employers aren't willing to compensate the households enough so they'll still work." Jobs can be destroyed by sellers (workers) as much as buyers (businesses). Mr. Mulligan reserves particular scorn for the economists making this "eliminated from the drudgery of labor market" argument, which he views as a form of trahison des clercs. "I don't know what their intentions are," he says, choosing his words carefully, "but it looks like they're trying to leverage the lack of economic education in their audience by making these sorts of points."
update: The University of Rhode Island says that it does not have permission to show the entire video. The relevant clip is here (somewhat longer clip here):

More video about ACA design fooling the voters

This is NOT the video from UPenn. This was is from Wash U, and I believe that Fox News uncovered it.

Jump to 30:11 for the discussion of how to undo the tax subsidy for health insurance. And watch for 90 seconds.



#Grubergate : anticipated on the last page of "Side Effects: The Economic Consequences of the Health Reform"

Long before the Gruber video went viral, I had heard the general sentiment. It is NOT a universal sentiment in my field, but prevalent enough that I knew that it had to be addressed in a prominent location. From the last page of my ebook, completed in May 2014:

The book was also written to show that economics did not, and does not, have to be ignored or superficially considered at the policymaking stage.
...Political pragmatists may claim that it is sometimes necessary to ignore economic consequences to support a worthy effort. Even without its pessimistic assessment of the ability of voters to receive information, this argument has been contradicted many times in history when unintended consequences overwhelmed promised benefits.




Tuesday, November 11, 2014

New uncompensated care estimate


Providers in 2014 save about $550 per person who gets insured because of the ACA, only small part of that $550 is an efficiency gain (the rest is a transfer to hospitals). Meanwhile, I estimate that the labor market efficiency losses are at least an order of magnitude greater, not to mention that the efficiency losses really are losses.


Monday, November 10, 2014

UPenn takes the high road

Upenn briefly removed its suddenly-viral video of the 2013 health conference plenary session. Thanks for putting it back!

Bad Economics for a Good Cause


Update: I had the benefit of watching the entire video (51:19 from a plenary session on "The Role of Economics in Shaping the ACA and How Economics Can Inform Inevitable Mid-Course Corrections"), but UPenn decided to remove it so all you can see is this clip from the 20:30 mark in the full video (another update: UPenn put the full video back -- see above): 
Omitted highlights include:
  • Prof. Pauly calls himself "The father of the individual mandate (although not this mandate)"
  • Prof. Pauly prefers the "Rambo" alternative the ACA's individual mandate.  Rambo would put all of the uninsured on a bronze plan without their permission and send them a tax bill for bronze premiums. 
  • Prof. Gruber claims that the Cadillac tax is excessive (effectively over 100 percent due to corporate income tax interactions with the Cadillac tax)
  • Prof. Gruber claims that the individual mandate penalty should be much larger.
  • Both Professors discuss the Oregon study and it's failure to show a statistically significant effect of health insurance on health.  Among other things, Prof. Gruber said that the study results widened his priors without changing their mean.
  • Prof. Gruber wants to expand the subsidies: expand premium subsidies for everybody and cost-sharing subsidies for people under 300% FPL.  He is optimistic that the opportunity for such expansions will come as (if?) healthcare gets more expensive.
  • Prof. Gruber would not oppose eliminating the employer mandate.  The revenue loss would be nontrivial (but not huge), he says, but the mandate is primarily affecting the composition of insurance (employer vs Obamacare) and who really cares about that. [remark: I agree that the employer mandate affects the composition of insurance, which is why the deficit effects of the employer mandate are huge]
  • Neither professor acknowledges the law's work disincentives or its large productivity costs.
  • Both professors are clear that they consider the pre-ACA status quo as the relevant alternative for evaluating the law.  That's good news for me: my book does the same thing.  

Sunday, November 9, 2014

Flashback: Deep down, Republicans know that Obamacare is awesome

"...it's not that Obamacare will fail. After all, if the law will just be a debacle, Republicans should let it take effect, ride the catastrophe to overwhelming victory in the 2014 midterms, and then use their massive congressional majorities to repeal it."
Ezra Klein and Evan Soltas, 14 months ago.