Results for “finkelstein”
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The Amy Finkelstein and Liran Einav health care plan

I am away from my review copy, so I am pleased that Matt Yglesias has offered ($) a good “standing on one foot” summary of the plan, as outlined in the new book We’ve Got You Covered: Rebooting American Health Care, by Amy Finkelstein and Liran Einav:

They call for:

  • A universal basic insurance system, covering both catastrophic and routine care but at a bare bones/no frills level of service.
  • A global budget, set by Congress, to determine how much money the basic plan has to spend on meeting the public’s basic needs, paired with expert panels to decide which services to cover.
  • An additive system of private top-up insurance that people could (and they anticipate mostly would) buy into to secure access to shorter wait times and more creature comforts.

The book offers a “think it through using first principles” approach, so perhaps the authors will be frustrated by my invocation of a “how has politics been going lately?” kind of response.  Nonetheless I see that Obamacare cost the Democrats dearly in more than one election, it had to be defanged (the mandate) to survive, it was supposed to be the new comprehensive framework that actually could pass (it did), and the most influential Americans just love their employer-provided private health insurance.

Whether you think those facts are good or bad, I take them as my starting point for health care reform.  This book does not.

I observe also that Obamacare passed, and American life expectancy fell.  I do not blame Obamacare for that, but I do notice it.  As a result, I have grown increasingly interested in “how can we boost biomedical scientific progress?” and increasingly less interested in “how can we reform health insurance coverage again?”  All the more because we seem to be living in a biomedical progress of science golden age.

One of the Democratic Party frustrations with conservatives during the ACA debates was witnessing them tolerate or even support Romney’s Massachusetts plan, but oppose Obamacare.  That I can understand.  One of the conservative frustrations with ACA was the fear that it would just be the first step in a never-ending, upward-ratcheting series of efforts to spend ever more on health insurance coverage, which has positive but only marginal implications for health itself.  After all, where exactly do the moral arguments for spending more on health insurance coverage stop?

Is there a politically feasible version of the Finkelstein and Einav plan that can spend less or the same?  Is there a politically feasible version of the plan period?  How much trust will there be in the promise that if I give up my private health insurance coverage, it will be replaced by something better?  How much trust should there be?

But again, the authors here have a very different perspective on the sector and how to do health care policy.

Economists in the Wild: Finkelstein, Oostrom and Ostriker

Here’s the latest Economists in the Wild video featuring Amy Finkelstein, Tamar Oostrom and Abigail Ostriker discussing some of their research (with Einav and Williams) on breast cancer screening. It’s a good video for illustrating how the tools of economics can be used to study a startling wide variety of problems.

Here’s a free assignment to help connect this video to class.
More professor resources.
High school teacher resources.

Amy Finkelstein wins the John Bates Clark award

Sorry to be late on this one, but here is the AEA take on her contributions, many of which involve health care economics and the study of health insurance.  I am not sure she was considered an obvious front-runner from the beginning, but in my view it is an excellent pick (without intending any slight to the billions who were passed over).  She is trying to understand the real world, and she is showing that policy economics should not have lower status in academia.  Obviously her major areas of study are topical today.

She does, by the way, have several previous mentions on MR and in retrospect she should have more.  Sarah Kliff adds a bit more.

Did Norman Finkelstein deserve tenure?

Dan Drezner has an excellent post, with which I largely agree.  I haven’t read the guy’s work (I doubt if I would like it), but my smell test suggests the following.  Many non-top universities tenure a large group of faculty members, none of whom really deserve it.  They are insiders, they have friends in the department, the replacements wouldn’t really be better, and so the tenure sticks.  It is quite easy to argue ex post that a "no" vote is warranted in most of these cases.  But if Finkelstein hadn’t done controversial work, he in fact would have received tenure along with many other non-deserving candidates.  He didn’t, and in that sense I also suspect the process was unfair.

Do recessions benefit our health?

That is the topic of my latest Bloomberg column, here is one excerpt:

The human and economic costs of recessions are deep and well-documented. They can also have real health benefits, however, and seldom are they expressed so starkly as in this sentence in a new paper from the National Bureau of Economic Research: “The Great Recession provided one in twenty-five 55-year-olds with an extra year of life.”

…Overall, the paper notes, age-adjusted mortality in the US fell by 2.3% during the Great Recession. The finding, from professors at MIT, the University of Chicago and McMasters University, broadly tracks previous research showing that that mortality rates rise in good times and fall in hard times.

And:

One answer is related to air pollution, which is lower in recessions, typically because of reduced economic activity. The benefits of lower pollution levels persist long after the recession — at least 10 years, according to the researchers’ estimates. Air pollution reduction accounts for more than one-third of the mortality benefits from the Great Recession.

And all of this:

The data do provide some additional clues. Except for cancer, for example, all major causes of mortality fell during the Great Recession. Decreases in cardiovascular-related deaths accounted for about half the mortality gains during that time. Furthermore, the mortality benefits were concentrated among Americans without college degrees. You might think that some of these improved health outcomes were due to people losing their stressful, low-paying jobs, but unemployment can be pretty stressful too.

For a 55-year-old, according to the paper’s estimates, about one-quarter of the economic costs of the Great Recession were countered by these mortality gains. So the Great Recession was still a very bad event — just less bad than we used to think. That is especially true for less educated Americans, who were hit harder by unemployment but also reaped the mortality gains.

At the top end of the age distribution, Americans aged 65 and older didn’t lose much from the Great Recession, in part because so many were already retired or working only part-time (in some cases, they were ensconced in jobs they were not going to lose). The researchers estimate that those over age 60 were also better off, on net, from the Great Recession.

Worth a ponder.  Here is the original paper by Amy FinkelsteinMatthew J. NotowidigdoFrank Schilbach Jonathan Zhang.

*The Two-Parent Privilege*

A new and great book, authored by Melissa S. Kearney of the University of Maryland.  The subtitle is How Americans Stopped Getting Married and Started Falling Behind, and here is one excerpt of the summary points:

Two-parent families are beneficial for children.

The class divide in marriage and family structure has exacerbated inequality and class gaps.

Places that have more two-parent families have higher rates of upward mobility.

Not talking about these facts is counterproductive.

The marshaled evidence is convincing, and I will be blogging more about this book.  While some stiff competition is coming, this could be the most important economics and policy book of this year.  And yes it is remarkable that such a book is so needed, but yes it is.  And here is Melissa on Twitter.

*Risky Business*

The subtitle is Why Insurance Markets Fail and What To Do About It, and the authors are the highly regarded Liran Einav, Amy Finkelstein, Ray Fisman.  The level is a bit above what could make this book a bestseller, but I consider that a good thing.  The book in fact is a classic example of how to present economic research in readable, digestible form and should be regarded as such.

I do have a few qualms, but please note these are outweighed by the very high quality of the core material:

1. I think the authors underestimate how rapidly “Big Data” is shifting the information asymmetries away from consumers/policyholders.  This is related to my recent remarks on AI.

1b. For reasons stemming from #1, insurance/surveillance/control, including from employers, will rise in importance as an issue, and soon.  I don’t get a sense of that from reading this book.  We might alleviate selection problems, while creating other difficulties including ethical dilemmas.

2. I would like to see more on moral hazard.

3. I also would want to see more — much more — on the public choice reasons why government insurance markets so often fail — the authors should consider their own title!  Should the Florida government really be propping up insurance contracts and insurance markets to protect homeowners against climate change-related losses?  No matter what your view, this kind of issue is under-discussed.  How about the FDIC?  Bailout-related moral hazard issues?  Those are hardly “small potatoes.”  I get that isn’t “the book they set out to write,” but still I worry that the final picture they present is misleading when it comes to market failure vs. government failure.  Adverse selection is really just one part of insurance markets, but this book doesn’t teach you that.

3b. Isn’t excess liability through our court system another major reason why insurance markets fail?  We needed a Price-Anderson Act, where government assumes a lot of the liability, to support our nuclear power sector, even though coal alternatives were riskier and more harmful, both short run and long run.  In terms of actual importance, hasn’t this been a major, major factor?

3c. Are restrictions on “boil in oil” contracts (no matter what you think of them ethically) another factor in institutional failure here?  Maybe that is one way of making America safe for bungee jumping.  Or we can follow New Zealand, and limit liability here altogether.  The interaction of insurance and liability law is a major issue, and we have not been getting it right.

4. The authors absolutely do consider “positive selection” (e.g., it is the responsible people who buy life insurance, thus leading to a favorable customer pool), but I would give it more emphasis.  If you believe that income inequality, “deaths of despair,” and educational polarization are growing problems, this phenomenon likely is becoming more important.

4b. How about more concessions in the Obamacare analysis?  For years I read that a weaker mandate would cause the system to collapse.  Yet the Republicans significantly cut back on mandate enforcement and the system seems to be getting along OK, at least from that point of view.  (In fact, politically speaking Trump arguably saved Obamacare.)  What did everyone miss?  Did they overrate adverse selection arguments and underrate positive selection?  It seems that was a major failing of the economics profession, which if anything was more insistent on “the three legs of the stool” than policymakers were.  The authors do cover this all at length, but they can’t bring themselves to note “we got down to 7-8 percent uninsured, the whole thing actually worked out OK, and the economists didn’t quite get it right.”

5. There are plenty of cases when expected “insurance” markets do not exist, and we cannot boil those down to adverse selection.  Why don’t all those Bob Shiller proposals happen?  (Is it really inside information about gdp?  That seems doubtful.)  Why aren’t there more prediction markets?  Why have so many proposed futures contracts on exchanges failed?  These all would seem to serve insurance-like purposes, among their other functions.  Yet their supply seems skimpy, at least relative to an economist’s expectations.  Why?  Perhaps there is more to failed insurance markets than meets the eye.

I know authors can fit only so much into a book, but if I can fit this much into a blog post…I would like to see more!  And I think that would result in a more realistic policy balance as well, and draw attention to major issues other than adverse selection.

Cash transfers vs. in-kind health care assistance

The benefit of Medicaid coverage received by a newly insured adult is less than half what that coverage costs taxpayers, which is about $5,500 a year.

The reason is simple: The uninsured already receive a substantial amount of health care, but pay for only a very small portion of it, especially when their medical bills are high.

We have estimated that 60 percent of government spending to expand Medicaid to new recipients ends up paying for care that the nominally uninsured already receive, courtesy of taxpayer dollars and hospital resources. In other words, from the recipient’s perspective the alternatives are $5,500 in cash or only about 40 percent of that — $2,200 — in health insurance benefits, on top of the care they were already receiving.

That is from Amy Finkelstein at the NYT.

Sunday assorted links

1. Profile of Amy Finkelstein.

2. 1/3 test positive in a semi-random Chelsea, Mass. sample.  And “Notably, 43.2% (95% CI 32.2-54.7%) of the confirmed SARS-CoV-2 infections detected across the two surveys were asymptomatic.”  That is from northern Italy.  and a further critique of the Santa Clara study.

3. Droplet more significant transmission than aerosol?

4. Sounds of the Bodleian.

5. “According to the Navy, the classroom antics had a darker side.

6. The new Magnus Carlsen tournament.  And new @pmarca book recommendations.

7. NYT survey piece on heterogeneities.

8. Good and extensive west coast Kaiser data set, and further evidence that R doesn’t fall nearly as much as you might wish for.  If you are advocating an extended lockdown, you really need to think this one through and present your reasoning.  So far I don’t see enough people doing that, nothing close, including the economists maybe even especially the economists.  Right now this is one of the biggest deficiencies in the debate.

9. Countries that have banned alcohol as part of their Covid-19 response.  It is striking to me how accepting the American coastal intelligentsia is of a strict lockdown, yet a permanent ban on alcohol is to them an unacceptable idea, curtailing basic liberties and impractical.

10. “…stay-at-home orders caused people to stay at home: county-level measures of mobility declined by between 9% and 13% by the day after the stay-at-home order went into effect.”  And: “We show that COVID-19 as a whole reduced consumer spending in a panel of over 1 million small businesses by 40% year-over-year. Conversely, COVID-19 did not affect aggregate consumer spending at 3,600 large businesses.3…Consumer spending at the brick-and mortar stores of large firms fell by 9%, but online transactions at these large firms increased by 56%.”

11. All this debt during a global recession is in fact dangerous.

12. William Hanage and Helen Jenkins at WaPo cover the IHME model with some seriousness.  Good piece, but we should have been debating this six weeks ago or more.

13. Andrew Gelman on the Santa Clara study (brutal).

Maybe pet health care is not seeing as much cost inflation as we thought

Nationwide’s pet health insurance division has partnered with Purdue University researchers to track trends in pet insurance payouts. The researchers track a “basket” of the most commonly-utilized procedures to see how the typical veterinary visit has changed in price over time. According to their research, these ordinary expenses declined by 6 percent from January 2009 to December 2017 after adjusting for inflation.

This decrease is corroborated by less reliable sources, such as the American Pet Products Association (APPA) annual consumer spending surveys. For virtually every year tracked (accessible via web archive), cat and dog owners reported spending less money on average routine and surgical visits. The data is jumpier than the Nationwide and Purdue rigorous analysis of 30 million insurance claims but confirms an interesting – and counterintuitive – trend.  In a system where consumers and patients’ “representatives” have enough skin in the game, healthcare prices behave like they would in most other markets.

That is from Ross Marchand, “Why cats pay a lower price for CAT scans.”  Here is earlier work by Einav, Finkelstein, and Gupta about pet health care being about as inefficient as human health care.  I don’t consider this a settled issue, but it is interesting to hear a revision on what had been the most common take.

Friday assorted links

1. Arnold Kling on the decline in labor’s share.

2. New results on RNA-based memory and even Lamarckianism of a sort.

3. Plastic bags designed to embarrass their users (the culture that is Vancouver).

4. What is it like to have a six-fingered hand?

5. Laurence B. Siegel reviews *Big Business: A Love Letter to an American Anti-Hero*.

6. Are markets becoming less competitive?

7. Amy Finkelstein on AER: Insights.

Interview with Chad Syverson

Interesting and substantive throughout, here is one bit:

Syverson: In general, we think companies that do a better job of meeting the needs of their consumers at a low price are going to gain market share, and those that don’t, shrink and eventually go out of business. The null hypothesis seems to be that health care is so hopelessly messed up that there is virtually no responsiveness of demand to quality, however you would like to measure it. The claim is that people don’t observe quality very well — and even if they do, they might not trade off quality and price like we think people do with consumer products, because there is often a third-party payer, so people don’t care about price. Also, there is a lot of government intervention in the health care market, and governments can have priorities that aren’t necessarily about moving market activity in an efficient direction.

Amitabh Chandra, Amy Finkelstein, Adam Sacarny, and I looked at whether demand responds to performance differences using Medicare dataOffsite. We looked at a number of different ailments, including heart attacks, congestive heart failure, pneumonia, and hip and knee replacements. In every case, you see two patterns. One is that hospitals that are better at treating those ailments treat more patients with those ailments. Now, the causation can go either way with that. However, we also see that being good at treating an ailment today makes the hospital big tomorrow.

Second, responsiveness to quality is larger in instances where patients have more scope for choice. When you’re admitted through the emergency department, there’s still a positive correlation between performance and demand, but it’s even stronger when you’re not admitted through the emergency department — in other words, when you had a greater ability to choose. Half of the people on Medicare in our data do not go to the hospital nearest to where they live when they are having a heart attack. They go to one farther away, and systematically the one they go to is better at treating heart attacks than the one nearer to their house.

What we don’t know is the mechanism that drives that response. We don’t know whether the patients choose a hospital because they have previously heard something from their doctor, or the ambulance drivers are making the choice, or the patient’s family tells the ambulance driv­ers where to go. Probably all of those things are important.

It’s heartening that the market seems to be respon­sive to performance differences. But, in addition, these performance differences are coordinated with produc­tivity — not just outcomes but outcomes per unit input. The reallocation of demand across hospitals is making them more efficient overall. It turns out that’s kind of by chance. Patients don’t go to hospitals that get the same survival rate with fewer inputs. They’re not going for productivity per se; they’re going for performance. But performance is correlated with productivity.

All of this is not to say that the health care market is fine and we have nothing to worry about. It just says that the mechanisms here aren’t fundamentally different than they are in other markets that we think “work better.”

Here is the full interview, via Patrick Collison.

The Ex-Post Dead Are Not Ex-Ante Hopeless

It’s well known that a large faction of medical spending occurs in the last 12 months of life but does this mean that the money spent was fruitless? Be careful as there is a big selection effect–we don’t see the people we spent money on who didn’t die. A new paper in Science by Einav, Finkelstein, Mullainathan and Obermeyer finds that most spending is not on people who are predicted to die within the next 12 months.

That one-quarter of Medicare spending in the United States occurs in the last year of life is commonly interpreted as waste. But this interpretation presumes knowledge of who will die and when. Here we analyze how spending is distributed by predicted mortality, based on a machine-learning model of annual mortality risk built using Medicare claims. Death is highly unpredictable. Less than 5% of spending is accounted for by individuals with predicted mortality above 50%. The simple fact that we spend more on the sick—both on those who recover and those who die—accounts for 30 to 50% of the concentration of spending on the dead. Our results suggest that spending on the ex post dead does not necessarily mean that we spend on the ex ante “hopeless.

…”Even if we zoom in further on the subsample of individuals who enter the hospital with metastatic cancer…we find that only 12% of decedents have an annual predicted mortality of more than 80%.

Thus, we aren’t spending on people for whom there is no hope but it doesn’t follow that it’s the spending that creates the hope. What we really want to know is who will live or die conditional on the spending. And to that issue this paper does not speak.

How much do people value health insurance?

There is a new and very good paper on that question by Amy Finkelstein, Nathaniel Hendren, and Mark Shepard (pdf).  In reality, the price elasticity of demand for health insurance is quite high, at least among lower-income groups:

How much are low-income individuals willing to pay for health insurance, and what are the implications for insurance markets? Using administrative data from Massachusetts’ subsidized insurance exchange, we exploit discontinuities in the subsidy schedule to estimate willingness to pay and costs of insurance among low-income adults…For at least 70 percent of the low-income eligible population, we find that willingness to pay for insurance is far below the average cost curve – what it would cost insurers to provide coverage to all who would enroll if the premium were set equal to that WTP. Adverse selection exists, despite the presence of the coverage mandate, but is not the driving force behind low take up. We estimate that willingness to pay is only about one-third of own costs; thus even if insurers could offer actuarially fair, type-specific prices, at least 70 percent of the market would be uncovered.

That is from both the abstract and conclusion.  I do understand the ideal of universal coverage, but note this:

For example, we estimate that subsidizing insurer prices by 90% would lead only about three-quarters of potential enrollees to buy insurance.

The somewhat depressing and underexplored implication is that the beneficiaries do not love Obamacare as much as some of you do.  In fact you may remember a result from last year, from the research of Mark Pauly, indicating that “close to half” of households covered by the unsubsidized mandate, by the standards of their own preferences, would prefer not to purchase health insurance.  And that was before some of the recent rounds of premium increases, and overall these new results seem to imply even lower demands for health insurance relative to cash.

Now, I think it is an open question how much “non-paternalism” is the correct moral stance here.  Maybe we should force upon people more health insurance than they would purchase in an adverse selection-free market, because a) they are ill-informed, b) they have children, or c) ex post we still need to take care of them in some way, if indeed their gamble to not purchase insurance turns out badly.

Do, however, note the words of the authors: “We conclude that the size of uncompensated care for low-income populations provides a plausible explanation for their low WTP.”  In other words, many of the poor do not value health insurance nearly as much as many planners feel they ought to, in large part because they are already getting some health care.

In any case, consider a political economy point if nothing else.  If you institute a policy that forces on people more health insurance than they think they wish to buy, do not be shocked if a huckster comes along offering them a supposedly better deal, and gets away with it.

Along related lines, consider also this result:

From the perspective of social welfare, to justify connecting the 5% least dense areas of North Carolina would require each adopting household value high speed wired broadband access at more than $1519 per month.

For the pointers I thank Peter Metrinko and Kevin Lewis.

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