Assorted links

1. Claims about the Irish recovery (not my view, but worth a read)

2. Sticker shock for Obamacare?

3. Bronze Age Danish woman wore garment from outside of Denmark.

4. New material on John Nash, interview with Sylvia Nasar.

5. Sleeping Beauty papers: “The longest sleeper in the top 15 is a statistics paper from Karl Pearson, entitled, ‘On lines and planes of closest fit to systems of points in space’. Published in Philosophical Magazine in 1901, this paper awoke only in 2002.”

6. Why the oldest person in the world keeps on dying? (less trivial than you might think)

7. Adam Thierer on how the sharing economy overcomes lemons problems.

Comments

@7

The WSJ just took a few shots at the sharing economy:

http://www.wsj.com/articles/how-everyone-gets-the-sharing-economy-wrong-1432495921

How Everyone Gets the ‘Sharing’ Economy Wrong

"Uber isn’t the Uber for rides—it’s the Uber for low-wage jobs"

"There is much gnashing of teeth by critics over whether or not jobs for ride-sharing companies are “good” jobs, but data from both Uber and Lyft show that more than 80% of their drivers have other jobs or are seeking other work, and Uber has said that 51% of its drivers are driving less than 15 hours a week."

Why would anyone expect Uber drivers to be highly paid? Driving is unskilled work after all. But these jobs are 'good' in the very real sense of being extremely flexible -- ideal for bridging between jobs or adding supplemental income. If you wanted to earn ~ $10 hour working only when you wanted to, other than Uber and Lyft your options would be....what exactly?

The expectation that these are good, highly paid jobs was created by Uber itself when they claimed that NYC drivers could make $90K. People went out and bought new cars thinking these were good jobs. Uber sets reimbursement rates high when they first enter a city then they gradually lower driver compensation until only the most desperate people remain. It's barely a minimum wage job and you put your life and property on the line.

These middleman apps are just Craig's List on steroids. A credit card company only gets a couple of percent per transaction - why do labor brokers (Uber, Taskrabbit) get twenty times that?

Agree that Uber oversold how great it is to be an Uber driver. But "put your life and property on the line" is a little much.

"These middleman apps are just Craig’s List on steroids. A credit card company only gets a couple of percent per transaction – why do labor brokers (Uber, Taskrabbit) get twenty times that?"

What Uber & Lyft are doing in running reputation systems and coordinating pricing, supply & demand are far more complex than credit-card processing or online classified ads. But there are no major barriers to entry in the business, so if the costs and complexity really aren't there, the margins will be forced down over time.

There are network effects. So margins can be kept higher than in an ideal world.

The network effects should be relatively weak. Many drivers are on call for both Uber and Lyft already and will grab fares on either service. And on the consumer side, there's little additional cost to checking more than one service.

Horseshit. They're running an algorithm. That's it.

The paper is another flyweight 'Mercator Projection': "Government regulations can harm consumers".

BAD regulations!!!

1) Maybe Ireland is able to pay people in service industries more because they have a competitive corporate tax rates and are the beneficiaries of inversions?

2. Well, isn't it lucky that the Supreme Court is deciding a case involving those states where no rate increase due to Obamacare may occur - maybe McArdle could talk about how not providing health care funding to the sick and poor is just good financial policy? It isn't as if she is writing for anyone living in a society that considers such thinking to be roughly on the same moral level as eugenics, after all. Letting the poor and sick die off more quickly is always the sort of moral argument that eugenicists find comforting, just part of those necessary steps to a much better world.

Jesus you are such a bore. It seems there is no fact, nor expression of opinion that you cant turn into blabbering about eugenics or how great Germany is.

Which is, of course, a breathtaking combination.

Righto!

The government should require a home fire/hazard insurer to "sell" me a policy after the house burnt down. And, by fiat declare that that is "good" financial policy. Hey, that worked well in the run-ups to the S&L crisis of the late 1980's and financial armaggedon in 2008!

Ok, too bad that has nothing to do with Obamacare.

Ever heard of pre-existing health condition, Einstein?

Yes, employer based insurance has taken pre-existing conditions for decades without a problem. It does this by limiting the enrollment time (usually once a year unless you are a new hire or had a life altering event like getting married or having a baby). Don't enroll in time and you have to wait it out a year without coverage.

Might some people game the system a bit by trying to time their enrollment to coincide with the onset of serious health problems? Probably a bit at the margins but certainly nothing that makes the system unworkable.

How exactly do you propose to deal with pre-existing conditions?

No - it does this by pricing in the cost of covering employees with pre-existing conditions.

Yes it does, of course. Again how exactly do you think pre-existing conditions should get paid for? Esp. given the fact that more and more of our health costs are not driven by unexpected emergencies (i.e. a broken leg) but instead chronic conditions?

The point is that what people want is prepaid health care, not insurance. Under certain tax regimes employers have an incentives to provide benefits in that form rather than as salary. Do health insurers have such incentives or are they really in the insurance business after all? That's what we are finding out now.

Last I checked mortality was 100% so life insurance, the oldest type out there, is essentially 'prepaid death benefits'.

Most life insurance is term insurance or at least requires monthly/yearly premiums, so no it's not that at all. I had term insurance but I didn't die and now I have assets so I dropped it.

If everyone kept term life until the day they died, the premiums would equal their death benefit (adjusted for returns on investments until then). All that 'dropping out' does is make the cost even lower for those who do keep term life until they die.

But of course if everyone kept term life for their entire life, it wouldn't be long before someone figures out that if instead of giving a premium to an insurance company, they just put it in their 401K, they could build up a nest egg equal in size to the insurance payout. In other words its essentially the same thing.

Insurance has always been about combing aspects of 'prepaying' with what a purist would call 'true insurance'. Paying for someone else to take on the financial risk of an unexpected event happening (early death, house burning down, cargo ship sinking).

@Boonton, you don't understand how term insurance works.

"All that ‘dropping out’ does is make the cost even lower for those who do keep term life until they die."

No. Term insurance is for a term. That's why it is called term insurance. The mortality charge is the mortality charge for the term in question. Costs in period 2 have nothing to do with lapses in period 1.

Boonton, you buy insurance to mitigate against the *risk* that you might die next year, or (in the case of health insurance) get some sort of expensive disease.

There would be no benefit in putting your money into a 401(k) if you accidentally die in a car accident at 20. You can't predict when you are going to die, so you buy insurance that pays your beneficiary the full amount if you die early - which is more money than you could have saved at that point. Life insurance isn't for 70 year olds who are going to die soon anyway, it's for parents in their 20s and 30s with young children.

Brian,

Fair point.

Hazel,

Again there is no law of physics or economics that would prevent insurance from having prepaid aspects. Very long term term policies (say 30 years) would have this effect.

prior approval,

Obamacare doesn't have much to do with providing care for the poor. In the US, poor people received unlimited, high quality care paid for by others prior to Obamacare. Even the expansion of Medicaid provided by Obamacare did not much change the availablity of medical care for the poor and sick as a practical matter. Medicaid does not change health outcomes for the poor anyway.

But even if you were right, nothing in your comment addresses McArdle's analysis.

Medicaid does not change health outcomes for the poor anyway

In the same sense that people who started exercising a week ago don't appear to be in much better shape than people who didn't start exercising.

No - it doesn't change health outcomes in exactly the sense bmcburney meant.

The mechanism by which Medicaid would make a difference in health outcomes is by swapping out ad hoc emergency care or erractic regular care (skimping on refilling needed prescriptions, putting off screen tests etc.) with more consistent primary care.

Assume for a moment this is correct. You are not going to see dramatic differences over the short term. A diabetic who skimped on their insulin to save money is not going to suddenly turn into a low cost patient because last month they got a Medicaid card that lets them refill their insulin every month without cost. The impact of the expansion of Medicaid is going to probably take at least a decade to demonstrate clear net cost benefits.

LOL a decade....

In general it isn't easy to dramatically lower health costs, especially since the easier to treat issues tend to serve the function of keeping people alive long enough to get really expensive and difficult to treat conditions. If you think you can measurably lower health costs in less than a decade then I'm not stopping you from selling your idea to all the many payers in the world who'd love to have it.

Healthcare economists have been studying the impact of medical spending for multiple decades, and the overwhelming consensus is that medicine has very little impact on overall health. Very generously 5% of overall variance at most. After genetics, sedentary-ness, diet, smoking status, air pollution, gut flora, and social status, medicine is basically a rounding error. Most serious medical interventions involve tens of thousands of dollars to add a few weeks of life expectancy. A lot of old, sick people are circling the drain and you're basically throwing money down a pit to slightly delay the inevitable.

Primary care basically has no effect on the healthy. Check-ups are totally unnecessary for those that are healthy, and those that aren't are going to wind up in the hospital anyway. Even gold standard screening procedures, like mammograms, are found to have zero or negative impact on mortality, because false positives and stress cause as many deaths as early detections save. Medicine on the margin is basically worthless, especially from a cost-perspective angle. It would be far more effective for the same amount of money to simply buy every American a gym membership or to take old, high polluting cars off the road.

http://www.cato-unbound.org/2007/09/10/robin-hanson/cut-medicine-half

Doug,

I think you might be 100% right but also 100% wrong at the same time. I know people who ignored chronic conditions and died. I also know people with things like diabetes which were detected and treated before they ended up with an ER visit. I also know people who had cancer detected early and essentially cured.

So how can both be right at once? Clearly if my regular doctor visits picks up on diabetes and allows me to take action to avoid it or at least delay it and keep the impact on me controlled that would be a win. But if there's a thousand people who went for regular check ups and nothing was detected then you could tally up that cost against my benefit and conclude nothing was accomplished.

We can play the same game with fire and police. The fire department saved a $400K house today. Yet the cost of the fire department on all the days where nothing happened adds up to $400K so should we get rid of fire departments and just compensate people whose houses burn? One cop stopped a mugger who stole $200....but what about the other 20 cops who just wrote parking tickets today? I'm sure all those people who got tickets would rather just chip in $5 to offset my loss rather than pay the excessive fines they were given.

And yet I'm not going to dump my health coverage or cease checkups and I don't think you've made an economic case for me to do so. You have an argument that we should make checkups and screenings more productive. Which is actually something if the incentives are right insurance could have a hand in doing.

Boonton (3:41 pm),

I admit that the mechanism you described could logically have that effect. In the real world, however, that does not occur. See Oregon Medicaid study. In fact, the short term health effects of additional medicaid availablity are indistinguishable from the long term effects and both are indistinguishable from the absence of any additional medicaid availablity (except for slight self-reported improvements in "peace of mind").

It is clear, however, that health care costs and usage increase somewhat. Only health outcomes remain the same.

Per Wikipedia:

In the first year after the lottery, Medicaid coverage was associated with higher rates of health care use, a lower probability of having medical debts sent to a collection agency, and higher self-reported mental and physical health.[1] In the eighteen months following the lottery, researchers found that Medicaid increased emergency department visits.[2] Approximately two years after the lottery, researchers found that Medicaid had no statistically significant impact on physical health measures, though "it did increase use of health care services, raise rates of diabetes detection and management, lower rates of depression, and reduce financial strain."[3][4]

Granted a mixed bag, although the benefits from things like better detection and management of diabetes and depression (and I assume heart disease) are going to take a good period of time to come to fruition....hence my analogy about looking at people who've been going to the gym for just a week and concluding they aren't in better shape than people who don't go.

Interesting analogy, since it's entirely possible that an entire population going to the gym would lead to better health outcomes than an entire population going to the doctor. Maybe we should have had an individual mandate for aerobics classes.

Boonton (4:37 pm),

It's not a "mixed bag" as to the matter under discussion (prior approval's groundless claim that the poor were dying in the streets for lack of medical care prior to Obamacare). There are no genuine health effects of medicaid expansion (Obamacare) for the poor as compared to the prior situation. In fact, the availablity of medical care for prior medicaid clients has probably been reduced by Obamacare. I don't see how you can argue otherwise. Certainly, Wikipedia would not support you if you did.

Care to explain how, for example, single male diabetics with no dependents, got free health care that provided the drugs to keep them healthy before Obamacare?

In nearly every state they were denied access to Medicaid unless disabled in some way.

Going to an ER to get a 90 day supply of drugs never happened. ER docs writing scripts for drugs costing hundreds of dollars without any group medical benefit does not result in patients with no money getting the drugs they need, in the case of diabetes, going blind, losing limbs, having strokes. Of course, once a decade or two of ambulance rides to the ER racking up even more unpaid bills at a cost of hundreds per trip, they do become disabled and now enter a nursing home costing hundreds per day.

Anyone who thinks people without money got the needed health care to stay healthy and able bodied everywhere in the US is purposely ignorant, or they are intentional liars.

mulp,

Presumably, anyone who really got free healthcare for chronic conditions after Obamacare got their healthcare more or less the same the same way before Obamacare. The expansion of medicaid as a result of Obamacare didn't change anything about healthcare delivery or access. If anything, it may have slightly reduced health access for the poor by "crowding out" previous medicaid beneficiaries.

"Anyone who thinks people without money got the needed health care to stay healthy and able bodied everywhere in the US is purposely ignorant, or they are intentional liars." Anyone who makes a statement like this is purposely ignorant, or they are intentional liars. There, how do you like that?

So before Medicaid expansion everyone was getting the same amount of healthcare 'for free'. This means then that while Medicaid is now paying for more healthcare than it did before, someone/something else must be relieved of the burden of paying for that care. I assume you would think it is an improvement to take what was essentially 'hidden Medicaid' costs off the books of local taxpayers, requirements on hospitals, 'bad debt write offs' and other areas where those costs were hiding and make them more transparent.

IMO there is also a synergy effect. I think people in the expanded Medicaid will/are swapping out erractic health care services with more regular care. I suspect over time that will lead to a net decrease in health care usage as at least a few criseses are avoided.

Presumably, anyone who really got free healthcare for chronic conditions after Obamacare got their healthcare more or less the same the same way before Obamacare Well, no. That's not the case.

In the US, poor people received unlimited, high quality care paid for by others prior to Obamacare.

Ignorant or completely dishonest.

Why not both?

Because they are contradictory explanations

The only thing about Megan you can be sure of is she has a double standard on policy outcomes.

The annual double digit increases in insurance premiums while Republicans controlled DC and health care policy were just fine - the doubling of employer health benefit costs while Bush was president was just a sign of fantastic Bush health care policy.

But once Obama and Democrats won and promised to "bend the cost curve" of doubling health benefit costs and insurance premiums during the two terms of a president, why it is just failed leftist policy after another because health care costs are not reduced to the level they were in the 90s.

If someone can point to any useful commentary on health care access and costs by Megan while Bush was president, I'd love to see it. And based on her commentary since Obama was elected, any positive comments re Mitt Romney merely proves an ideological bias.

I tend to agree. No matter what there will always be a horror story somewhere about some insurance company not doing right or someone hit with a huge increase (but missing from this context is the base, if the initial price was well below market prices, a consumer can grumble but you can't really make a federal case out of a price hike....happens every year or so with my cable company).

Megan is not a fair judge but it is helpful to have a devils advocate trying to dig up dirt. If there are problems, she is likely to find them which is useful IMO for the discussion provided the problems are kept in context.

Pssst. I don't want you to be embarrassed but America had Medicaid before Obamacare.

So, people who were poor already had healthcare.

And even people without insurance who earned too much for Medicaid got care, too.

If #3 interests you, I highly recommend The Last Imaginary Place with lots on ancient/medieval/'indigenous' trade routes and cultural transmissions around the Arctic. (Disclosure: I used to work for U of C Press, wasn't involved with this one other than getting an employee discount on it.)

Sorry, link didn't come through: http://press.uchicago.edu/ucp/books/book/chicago/L/bo5460650.html

P&C insurance companies very rarely make a profit from their insurance operations. It is perfectly normal for insurance claims and operating expenses to exceed insurance revenues.

They normally makes their profits by investing their receipts for the time between when they get the receipts and when they have to pay claims-- normally a few years.

Wall Street has long viewed P&P firms as a way to leverage the initial capital in the stock and bond markets..

So Megan McArdle is just describing the normal operations of P&C companies when she rants about their payments exceeding their revenues.

I think this is a bit overblown. If I see a doctor today that doctor is probably, I suspect, going to get a check from the insurance company in less than a year. Granted they make doctors jump through a lot of hoops to get paid and many doctors offices do let the paperwork and billing get behind, but let's say a year's span between treatment and payment is generous.

In one year what type of return is reasonable for an insurance company to make in an environment where interest rates are 0%? If they average 5% return I'd say that is impressive. If they are doing much higher than that I'd say they should consider getting out of the health insurance business and becoming a hedge fund.

However I do note Megan commented:

It seems as if states where insurers initially underpriced are now trying to move toward a natural price somewhere between $3,600 and $5,000 a year for a single nonsmoker. If that's the price of providing basic benefits, regulators cannot command it away by fiat; the best they can do is to force insurers out of the market.

So, like $3,600-$5,000 is around the average price of insurance these days. Many people may not realize that since their employer is paying a good chunck of that outside their paychecks. I look at it this way, the cable company charges you about $100 a month for the normal setup. If you're paying $50 a month, you're going to get a 'shocking' increase sooner or later. There isn't a crises in monthly cable bills, you're just getting jacked up to where the rest of us have been for quite a while.

Care to comment on why community rates insurance is so awesome?
Why should the relatively healthy (and low-risk) pay the same rates as the relatively unhealthy (and high risk)?
If I eat well, exercise, and avoid riding motorcycles without a helmet, why shouldn't my insurance premiums be lower?

Not really awesome but the alternative is the sick can't get insurance, so then what you're saving in premiums you're paying in taxes.

Why care about riding motorcycles without a helmet. Unless your 18 auto insurance is pretty cheap and covers injuries.

You are incorrectly assuming that if the sick can't get insurance that the public will pick up 100% of their medical costs anyway.
But reality is that most sick peo[ple do have some income and assets that they put towards paying their own medical expenses. So I'm still better off ONLY paying for the fraction of sick people who don't pay their bills.

Nevermind that the simpler solution is to just not allow insurers to drop people after their health goes downhill, unless they stop making payments, obviously. There's no need to mandate coverage of pre-existing conditions even for people who didn't bother to buy einsurance in the first place. Insurance rates will be marginal higher, but it won't have all the perverse side effects on the insurance pool and need for a mandate.

The sick already do put quite a bit of their income and assets against their own care. I have very good insurance yet a serious condition results in serious expense for me. For example, an in-network PET scan costs me nearly $700 OOP.

I'm not clear how your proposed system would work. Once you get insurance (when you are healthy), you never drop it least your protection drop with it? So you can't change insurance companies or if you do you are forever locked out unless you are able to pay very high premiums to cover your conditions?

This all seems quite unnecessary given the fact that something like 80%+ of the non-old/poor group already are covered by employers and employer provided insurance is essentially community rating. Sign up during the open enrollment period and your pre-existing conditions are covered and everyone pays the same price. This has been going for generations now and it hasn't caused any real choas.

So given that the majority of the market system has worked why the urgency to undo this in the individual market?

"They normally makes their profits by investing their receipts for the time between when they get the receipts and when they have to pay claims– normally a few years. "

That's for Life insurance. It has nothing to do with selling health insurance policies.

spencer,

Health Insurance and P&C insurance are two very different things. See below.

#3 - Not in the least surprising. Economists and archaeologists should work together more often. Barry Cunliffe's magisterial Europe Between the Oceans: Themes and Variations, 9000 BC - AD 1000, for example, has the potential, imo, to greatly enrich any understanding of development or historical economics.

1 - Ireland is outperforming Greece. Woo-Hoo!

Irish unemployment was 10% (from 15% high) in April 2015; Greece 26% in December 2014. In the kingdom of the blind the one-eyed man is king.

What did Iceland since 2008 do differently from Ireland? Icelandic unemployment was 4.6% in February 2015.

The tiny 300,000 person nation of Iceland defaulted on its international debts, devaluated its currency and refocused its economy to the tourism and fishing sectors.

There are things that a 300,000 person country can do that a 4 million person country cannot do.

Example, if you eliminated fishing quotas for the Irish people, how much extra fish would they catch per capita? What would the impact be on Ireland's current account balance? My guess is not very much impact.

Do the same in Iceland and you can temporarily create a little economic miracle.

Irish territorial waters are very big. Irish fishing is a tremendous resource (that we share with the EU)

Like Cooper said, Iceland is 300,000 people. By comparison that's the same size as the Spartanburg, SC metropolitan area. I'm sure I could find many, many 300K population centers with similar economic miracles since 2008. Would you be impressed if I told you that Spartanburg's relatively strong performance compared to Charleston should influence global economic decisions?

#7 Internet ratings. Really? They are gamed and faked in so many different ways.

spencer,

You are completely wrong. Yes, P&C loss ratios vary a great deal. In general, however, extreme loss ratios like the ones McArdle describes only occur at P&C insurers following major disasters like earthquakes or hurricanes (or other unexpected circumstances for casualty claims). In the P&C world, if something big and bad happens one year, insurers figure next year will be better and, normally, it is. Rates may go up some in the short term but insurers are looking at the long term when they price the risk expecting that the rate of disaster events will not change much going forward.

For Obamacare we are talking about medical insurers. Medical insurers no reason to believe that their loss ratios are going to improve next year unless medical costs go down (never happens) or the health of their insured population improves. Obamacare insurers cannot refuse insureds based on pre-existing conditions so they cannot take many effect steps to improve the health of their insureds. On the other hand, as time goes on, increased costs will tend to drive healthy insureds out of the system making loss ratios worse. As time goes on, people will learn better how to game the system buying healthcare or buying more expensive insurance products only after they are sick.

This problem will only get worse as Obamacare fails and there is no practical way to change the situation.

Again note Megan's throwaway line:

It seems as if states where insurers initially underpriced are now trying to move toward a natural price somewhere between $3,600 and $5,000 a year for a single nonsmoker.

yea that is about what insurance costs for an average person so if an exchange policy happened to be well below that it will almost certainly rise for a while until it meets that level (unless the insurance company somehow manages to get an exceptional crop of very healthy people in their pool).

Keep in mind outside of Medicare and Medicaid, the majority of people get coverage from their employer so the exchange policies, while they get headlines, are a bit of a side show for people who buy their insurance directly instead of at least splitting costs with their employers. The US spends about $9100 per capita on health care so a true universal policy that simply took all of our health costs and divided by the # of people the way you'd split the tab when you go out with your friends would come out around $9100 a year. So $3600-$5000 is actually about right.

People who buy their policies from the exchanges might be a bit healthier on average to begin wtih. Freelance gigs, jobs with very small employers, self-employed is probably a category that does veer towards those who are a bit younger and/or have a bit more energy and $9100 includes the very old (who are really sick) as well as out of pocket expenses.

So what exactly is the problem? That people who buy policies on their own spend $5K per year? Employer coverage is like $8K per year and has not altered much before or after Obamacare (except increases have slowed down dramatically). What do you think people who buy their own policies should be spending?

I was paying $5000 and up when forced to buy my own health insurance while Bush was president, 2003 on, for a $5000 deductible policy. I had been continuously covered by the same insurer in effect for decades (it had been a not for profit bought by Wellpoint Anthem and made for profit to cut premium cost increases!). By Bush's last year, my premiums were over $8000 per year. When the MLR rule of Obamacare kicked in, premiums where reduced from about $9000 to about $8000, and then resumed increasing. If I hadn't reached 65, Obamacare premiums for a platinum policy would have been lower WITHOUT SUBSIDIES, and a bronze plan would have been around $5000 with a lower deductible than I had to take in 2003 to not pay $8000-9000 per year premiums.

NH at the time had only one insurer that accepted all "free market" applicants (with ratings, exclusions) but since Obamacare, there are now 5 insurers offering plans on the exchange and that has increased the number of options available to small businesses.

You would think conservatives would be happy. Nope. They complain that the regulations that enable competition are evil and they want no regulation, which is what resulted in just one insurer serving the entire state because only it had the scale (80-90% of covered individuals depending on where in the state) to withstand the cherry picking from outside insurers. Its market share came from its coop origins as Blue Cross Blue Shield which were not insurers before the 80s and Federal law forced them to be treated as insurers.

Whereas under Obamacare my premium and my deductible both doubled. If conservatives aren't all content, its because they don't have the laser like focus on you that you do.

I think there's a huge amount of people who are under the delusion that insurance is the place to look for innovation. it isn't.

Insurance is like going out to eat with your friends. You can take the tab and divide it by the # of people at the table. Or you can try to calculate what each person ate and get them to pony up accordingly. Or you can do something inbetween. For the most part, though, this doesn't change the fact that everything that got served is going to get paid for by the group at the table. Maybe there is a tiny bit of room for 'innovation' in the sense that some savings can be achieved by sharing pitchers of beer or some group dishes. Beyond that it is all game playing. If you eat the steak with a bunch of salad eaters, try to get them to split the bill evenly, for example. Got a big boozer at the table, try to get everyone to pay for their own drinks.

As a result there's only so many ways an insurance company can address the problem of splitting the tab.

1. Game the pool, get lots of 'salad eaters' into the pool and scare away the steak eaters.

2. Bargain, a big enough table can negotiate some free dishes and drinks from the establishment. This works best if you order ahead of time and get everyone to order the same dish or preset menu so you can really drive a bargain.

3. Figure out ways to reduce demand (i.e. if we show up a few hours after lunch, we won't be so hungry and won't order as much to begin with).

#1 only works on the individual level but not the entire system. Drive sick people out of the pool and yes the remaining healthy people will get lower rates....but since the sick people are going to get care one way or the other the buck is going to be passed around some other way. Republicans who clamor for changing Obamacare by removing pre-existing conditions, when pressed, try to solve the sick problem via things like a 'state pool'. In other words, you may get lower insurance rates but you'll also get tax increases.

#2 works well. If an insurance company can't play #1 then with #2 you can try to cover everyone and use your immense buying power to demand lower prices. Of course this works best when you get everyone going to the same set of doctors/hospitals, push this too hard and people start to grumble about all the great doctors they'd like to see but can't because they are 'out of network'.

#3 is an opening for innovation. They can use their in house experts to collect evidence and data and push care away from expensive options that don't have great impact and towards lower cost ones. Since this type of expertise is beyond the scope of most individuals and doctors, this is an opening for innovation that could add a lot of value. Unfortunately left to themselves, #1 is probably much easier to do.

But that's about it. You're not going to get much more out of insurance companies IMO. This is not the place where a lot of value will be added.

HMOs were good at #3 in that they didn't pay for procedures unlikely to pay off.

But that made them incredibly unpopular. The steak-eaters don't like being told "no, really, the salad is just as delicious, here's a study that proves it."

And once HMOs could be sued for failing to cover stuff, they essentially became normal insurance companies.

Actually I think HMOs are best at #2...hence the ever shifting set of doctors in and out of network.

These days that's probably all they do. But they did do #3 in the 1990s. http://www.overcomingbias.com/2009/06/remember-the-hmo-revolution.html

It was the year 2000 that Star Trek Voyager had the holodoc take on an evil HMO that dared to deny people medicine. That was still relevant at the time.

> [B]ut since the sick people are going to get care one way or the other the buck is going to be passed around some other way.

A lot of the truly massive high-cost insurees are cancer patients getting $500K chemo drugs that don't have any proven efficacy. I don't think these cases are going to get the same care one way or another. The biggest free lunch in medicine is cutting chemo spending substantially, and in many cancer varieties simply eliminating it.

"People who buy their policies from the exchanges might be a bit healthier on average to begin wtih. Freelance gigs, jobs with very small employers, self-employed is probably a category that does veer towards those who are a bit younger and/or have a bit more energy and $9100 includes the very old (who are really sick) as well as out of pocket expenses."

It may have been reasonable for Obamacare supporters to hope for this prior to implementation of the program. Now, this is just denial. Even if this were true as compared to the general population (its not), the bottom line is that the population which buys healthcare on the exchanges is less healthy than insurers hoped in their initial rate calculations so they are increasing prices. In some cases, the increases will be huge, in some, they will only be two or three times the general inflation rate. In either case, the increase in prices will tend to drive more healthy people out of the exchanges. The healthy lower middle class will simply bite the bullet at tax time and purchase health insurance only when they get sick. Next year's insured population will be sicker and the year after that even sicker.

Also, I believe some healthy Obamacare enrollees purchased plans mainly for political reasons. As time goes on, I think some of those people may re-assess the cost benefit analysis.

One place where Meagan messed up was in her claim about the pool being "older and sicker than expected." This follows a longstanding meme about how what matters is having lots of healthy young people, especially males. But, in fact, what most of these commentators miss out on is that the insurance companies already cover for all that by charging much higher premia for those older and sicker people than they do for the younger healthier ones. That is not what is going on here.

This does not mean that she is completely wrong. Quite likely there are some states that will see large premia increases on the order of what we used to see last decade, although how large those will be remains to be seen. The system is still shaking itself out, although mcmb's certainty that "Obamacare will fail" looks as silly as it did on the last go around on this stuff, now reduced to a fading religious faith repeated ritually as a mantra.

No, they are correct and your argument is fundamentally flawed. Individual rates are unisex and have a proscribed age rating curve that caps the age differential at 3-1 when claims is closer to 7-1 thereby raising prices the young and male and decreasing them on the older and female. This is also the likely reason that mulp's in her example from earlier had a decreasing premium. Nothing to do with MLRs, all age curve. Heal

No, they are correct and your argument is fundamentally flawed. Individual rates are unisex and have a proscribed age rating curve that caps the age differential at 3-1 when claims is closer to 7-1 thereby raising prices the young and male and decreasing them on the older and female. This is also the likely reason that mulp's in her example from earlier had a decreasing premium. Nothing to do with MLRs, all age curve.

Barkley,

Under Obamacare, health insurers cover those that sign up for a standard coverage at a price which incorporates their expectations concerning the health care costs of the group they cover. If their initial expectations are wrong because the group which signed up did not include enough young, healthy, people they will need to increase their prices (prior to Obamacare, they could reduce the services they cover or limit coverage to people they already knew were sick). If insurers increase their prices, young, healthy people will be "ripped off" by Obamacare even more than they were before. Some of them will make the calculation that the incremental cost of not receiving a tax refund is less than the cost of an Obamacare policy. On average, that will make the remaining pool of insureds even sicker. Which will drive prices even higher, which will drive healthy people out of the pool, etc.

Of course, there are some provisions of Obamacare which mitigate the initial risk to insurers (at the expense of taxpayers). However, those provisions will terminate in the future and insurers know they will terminate. Thus, insurers will not stay in the program long term if they are unable to charge insureds enough in premiums to recover their costs.

This analysis is not based on a "fading religious faith", it is a specific, reasonably detailed, predictable outcome based on practical experience. If it's wrong, how is it wrong?

There's a big difference between a pool being 'sicker than expected' and 'sicker'. Sorry if the pool was the latter then the price being converged upon would be higher than the average cost of insurance.

Boonton,

Yes, there is a difference between a pool being "sicker than expected" and just being "sicker [than the general population]." For insurance purposes, however, it is the former which matters. More sick people than expected mean higher premiums than expected. Higher premiums means that, however many healthy people signed up through the exchanges last year, fewer will sign up this year because of the cost increase. Which will make next year's pool even sicker, which will increase premiums the following year, which will make the subsequent year's pool sicker, etc.

Even if premiums had remained stable initially (something which was never going to happen), as time goes on the number of people gaming the system will increase and the number willing to pay a price in dollars for their political opinions will decrease. Also, this quarter's CPI shows medical inflation is running much hotter than general inflation and accellerating.

I don't understand what you guys think will happen to turn the situation around. Where is the miracle coming from to save Obamacare?

If the average population cost about $5K-$6K per year to insure (that's less than $9K per year that the US spends on health per capita, but $9K includes OOP spend as well as the spend done by the elderly), then a sub-pool that is priced at $3K will expect to get price increases after insurance companies get experience with them. (Unless that sub-pool happens to be exceptionally healthy, but if they are then that would mean the pool of everyone else would end up sicker thereby causing their insurance rates to go up).

If you tell me that a sub-pool is getting large price increases topping out at about $5K per year, that in itself is not a problem. After all, if the pool is made up of average people their natural price should be around $5K per year.

I don’t understand what you guys think will happen to turn the situation around. Where is the miracle coming from to save Obamacare?

Save it from what exactly? Higher health insurance premiums in 15% of the market that was briefly priced very low?

6. I thought the punch line was going to be that the stress of all of the press and activity from being named the oldest person is what kills them, but nope, there are just a lot more super old people these days.

Me too! Especially when they talked about calls from 50 journalists calling to interview her in one weekend. Do we really need 50 separate versions of, "hey I talked to this lady who is really old."

I liked "Strangely, the 20th century is considered to have started Jan. 1, 1901". Has he really never heard the scrupulous/pedantic on this theme?

You don't need it but I bet the Journo does. If you write for some small paper in Boondocksville this is probably the biggest story he got in 6 months.

#1 - Industrial policy is driving the Irish recovery? Would be nice to have some evidence for this other than "an agency exists with the formal duty of attracting FDI." How many other industrialized countries have similar agencies? Almost all? This piece reminded me strongly of the old MITI worship in heterodox political economy from the 80s and early 90s.

#3 According to the abstract, not only were the garmets made outside Denmark, but so was the woman.

So, nobody commenting on Sylvia Nasar's amazingly uninformative and error-containing interview? I'll bite.

It really is sort of depressing that so much of the commentary on Nash's death has been about the film and in the case of this interview how it related to Nasar's book. As in the book, she makes errors, such as stating that von Neumann "invented game theory,"" while people like Borel and Zermelo were running around before him doing it pretty seriously. Probably the most interesting tidbit she provided is that she was worried her book might push Nash back into illness, an understandable concern in retrospect. It would appear that she justifies the softening and errors of the movie compared to the book sort of on similar grounds, although obviously much of it was about Hollywood and pleasing the public, as was the case with the many errors compared to the underlying book in the movie version of The Imitation Game about Alan Turing. Anyway, she missed a lot of important stuff that has gotten little publicity.

1) Nash and his wife were returning from the airport from Norway from what was clearly a life-culminating experience, namely his finally receiving the math equivalent of the Nobel, the Abel Prize (along with Nirenberg) and getting it for what he was publicly most proud of, his proof of the embedding theorem. He always viewed his game theory diss as using "trivial" mathematics.

2) She said not a word about the fact that it is likely that a factor in this award was the revelation in 2012 of another massive intellectual achievement by Nash when the NSA declassified a letter by him written in 1950 and sent to the NSA in 1955, in which he virtually invented modern computational complexity and proposed to use the N-NP distinction as a foundation for encryption, which was later done. He even forecast that while the distinction is true and useful, it would be very difficult to prove, and indeed it remains unproven, arguably the most important unsolved problem in theoretical computer science. He got his prize for the embedding theorem, but this may have pushed it over, and it links him with Alan Turing as being not only suffiering greatly, but really being involved in super-secret cryptanalysis.

3) This also explains why Adrian Albert offered him a job in the Chicago math department in 1958, something recounted in Nasar's book, only for the purpose of showing Nash' initial descent into mental difficulties, which Albert interpreted as being mere eccentricity. Nash refused the offer, as Nasar reported (this did not make the movie) because he told Albert that he was about to be appointed "Emperor of Antarctica," hah hah hah. What Nasar seems to have missed and may not fully know or understand even now is that Albert was the leading cryptanalyst in the U.S., whose WW II remained classified for decades (and may still be classified, some of it), but who almost certainly knew of Nash's secret letter. This was surely why he was so eager to hire Nash at Chicago, but ran into difficulties doing so, to put it mildly.

For much more on this, including stuff really not widely known, see http://econospeak.blogspot.com/2015/05/john-nash-as-cryptanalyst.html . (Yeah, I already posted this link on the earlier Nash thread, how boring.)

Do you suppose Nash to have been the cleverest winner of the Nobelish Prize in Economics?

In terms of sheer IQ, probably yes, although if von Neumann had lived long enough, then he probably would have been. However, some others almost certainly knew more economics than he did and maybe even more in general, with such people as Samuelson and Arrow being leading candidates on that one. Arrow is pretty polymathic, whereas, even before his mental problems became so great, Nash was pretty narrowly focused, if brilliantly so.

@ 2
These results should bring into better focus a basic change that has occurred:

Legislation now prescribes *Healthcare* contracts on the basis of transfers of COSTS, rather than insurance which is transfer of RISKS.

Evaluations of the origins of the COSTS (kinds, degrees and repetitions) of particular individuals have been constrained by legislation and regulation.

What seems to be overlooked are the provisions (for the early years) of transfers of the risks of those insurers arising from imbalance in transfers of costs to be provided by "reinsurance;" also mandated by statute.
Perhaps the states will insist on including those provisions in rate calculations (a "loss pass-through").

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