Assorted links
The Federal Employee Health Benefits Plan
Walton Francis has a new and very substantive book on health care policy, with the exciting title: Putting Medicare Consumers in Charge: Lessons from the FEHBP. It starts with a simple premise:
During the last half-century, the United States has operated a half-dozen major health-care financing systems in parallel, each operating in its own world, and with only minimal attempts to observe and learn lessons in program A that could be useful in program B.
Francis studies one of these programs, namely FEHBP, in detail. He portrays FEHBP as "premium support" in contrast to the "defined benefit" approach of Medicare. On top of it all are competing private insurance plans and the details of the plan you end up with are decided by competition, combined with some regulation. I now think of FEHBP as a somewhat indirect voucher scheme, albeit with complications. Francis argues that FEHBP is a better model for health care reform than is Medicare and that FEHBP is better for both offering diverse programs and inducing cost control. The employee pays about a quarter of the price and FEHBP also covers many retirees, apparently with reasonable success. Here is Wikipedia on FEHBP. Here is the program's own home page and it does I should add touch the Cowen family.
One question I have is what FEHBP would look like when scaled up to an entire country, including to people who have never had enough human capital to work for the U.S. government. (Here is one critique of a scaled-up FEHBP but I don't find it so convincing, at least not compared to the problems with other approaches.) Still, this book is essential reading for anyone interested in health care policy. I can't call it exciting, but it is a model of clarity and substance throughout.
Here is one report, from last night, that a modified version of the FEHBP idea will be substituted in for the public option. I don't yet have reliable details on what this might mean, or who it might cover (just the people on the exchanges?) but that is why I am accelerating this post even though I do not have fully formed thoughts on FEHBP as a model for broader reform.
Addendum: Michael Tanner offers related comments.
Questions that are rarely asked
Why are we spending a multiple of Afghanistan’s total GDP on fighting a war in the country?
Some follow-ups are:
Couldn’t more be done, for cheaper, with cash for bribes and development? How is it that it doesn’t take the Taliban years to train competent soldiers?
That is all from Matt Yglesias.
Assorted links
1. Why do aphorisms and cynicism go together?
2. When did bank executives cash out?
3. In defense of managed care, with a pointer on median wage stagnation.
4. Chinese vs. Russian reforms.
5. Monkey language has syntax.
6. The final paragraph of the article: "But the big winner is the rabbi, a recent arrival from Brooklyn who is
working hard (against tough odds) to bring his Lubavitch movement to
Montana. He has been scouring the state for anyone who can speak
Hebrew, and is elated to have found a German shepherd he can talk to."
Meta-list for fiction, best books of 2009
I've read through the lists of many other sources, and these are the fictional works which recur the greatest number of times, in my memory at least:
1. Lorrie Moore, A Gate at the Stairs.
2. Colum McCann, Let the Great World Spin.
3. Dan Chaon, Await Your Reply: A Novel.
4. David Small, Stitches: A Memoir.
By the way, via Literary Saloon, here is a French best books of the year list. They pick Let the Great World Spin as the book of the year, non-fiction included. I will be reading it soon.
My favorite works of fiction this year were the new Pamuk, Gail Hareven's The Confessions of Noa Weber, and A Happy Marriage, by Rafael Yglesias.
Pirate credit, pirate collateral, and pirate price discrimination, in Somalia
Pirates don't even have to pay upfront. Those holding ships hostage that haven't yet received ransom can buy goods on credit — at elevated prices — and settle up their debts when the ransom money comes in, villagers say.
Here is evidence of price discrimination:
When villagers think the price of a cosmetic is too high, their reply is "we are not pirates," said Abdullahi.
The closer to the pirate dens one gets, the higher the prices go. In the nearby town of Eyl, a cup of tea costs three times as much as in Bossaso. In Eyl, pirates pay $5 for a shoeshine, compared with 50 cents in Bossaso, said Hashim Salad, a store owner.
The article is interesting through and I thank Cyril Morong for the pointer.
The power of arbitrage: ask Mr. Pickles
Enthusiasts of frequent-flier mileage have all kinds of crazy strategies for racking up credits, but few have been as quick and easy as turning coins into miles.
At least several hundred mile-junkies discovered that a free shipping offer on presidential and Native American $1 coins, sold at face value by the U.S. Mint, amounted to printing free frequent-flier miles. Mileage lovers ordered more than $1 million in coins until the Mint started identifying them and cutting them off.
Coin buyers charged the purchases, sold in boxes of 250 coins, to a credit card that offers frequent-flier mile awards, then took the shipments straight to the bank. They then used the coins they deposited to pay their credit-card bills. Their only cost: the car trip to make the deposit.
The story is interesting throughout. There is this (unconfirmed) report:
One FlyerTalker, identified by his online moniker, Mr. Pickles, claims to have bought $800,000 in coins. He posted pictures of the loot on FlyerTalk.
He says his largest single deposit was $70,000 in $1 coins. He used several banks and numerous credit cards. He earned enough miles to put him over two million total at AMR Corp.'s American Airlines, giving him lifetime platinum-elite status — early availability of upgrades for life and other perks on American and its partners around the world. He also pumped miles into his account at UAL Corp.'s United Airlines and points into his Starwood Preferred Guest program account.
Assorted links
1. Should public sector jobs come first?: a symposium, including me.
2. Tim Duy's version of the recalculation story, recognizing a significant cyclical component as well.
4. What should I eat?, part II.
5. Can there be a market for used digital files?
6. Is Wikipedia making us stupid?, and other links from Michael Nielsen.
Cato dialog on Tom Palmer’s new book
Here is a YouTube of Tom Palmer presenting his new book, with yours truly commenting, at the Cato Institute. David Boaz summarizes part of my comment. Here is my previous post on Tom's new book and the book, Realizing Liberty, is available for purchase on-line, Tom points us to this podcast of him criticizing me; his comment reflects some of the differences in our points of view.
One question in the dialog was to what extent an adherence to liberty — at the level of an entire polity — is likely to be culturally specific. I see pro-liberty ideas as more likely to be Anglo-American than Tom does or at least more northwestern European. It is for this reason, I think, that he favors free immigration whereas I, although very pro-immigration relative to the political debate, favor legal limits in many cases, including the United States, Switzerland, and Iceland.
A second question is to what extent ideas about liberty can be supported without encouraging "the paranoid style" in American politics. Too often advocacy of individual liberty ends up bundled with the paranoid style of reasoning and overly simple good vs. evil narratives. I have yet to see a good explanation for why.
Overall I am more suspicious of "ideology" than is Tom. He sees ideology as having driven many very beneficial social movements, such as the abolition of slavery. I accept that point but still fear that ideological reasoning is likely to end up biased away from an emphasis on abstract concepts. That will mean ideology is often useful for ending very concrete social injustices, but that ideology is unlikely to bring people to a deep understanding of "better economics," especially when the distinction between the seen and unseen is important. The strongest ideologies also tend to be nationalistic.
Markets in everything China contract of the day
She is now only allowed to beat him once a week:
The 32-year-old man, who was named by the Chongqing Evening News as Mr Zhang, took the unusual step after suffering intense abuse from his wife, who studies kung fu.
"I don't want to beat him, but arguments are inevitable and I can't help myself," his wife told the newspaper. She added that in the week before they signed the deal, she had beaten him up three times.
If she breaks the contract she has to return home to her parents for three days.
I thank Nathanael Minarik for the pointer.
*What Works in Development?*
The subtitle is Thinking Big and Thinking Small and the editors are Jessica Cohen and William Easterly. Usually essay collections are of low value but this is the single best introduction (I know of) to where development economics is at today. Contributors include Dani Rodrik, Simon Johnson, Michael Kremer, Lant Pritchett, Ricardo Haussmann, and Abhijit Banerjee, among others. Even better, there are two published (short) comments on each essay, a practice which should be universal in every collection, if only to establish context. My favorite piece was Banerjee's on why development economics should "think small" rather than just doing macro issues. Recommended.
Assorted links
1. The British Roissy is in fact Speaker of the House.
4. How starfish eat a seal (video).
5. The Arabs, by Eugene Rogan; a superb book which somehow I had forgotten to review this year. It's especially good for showing how their response to Western imperialism has been conditioned by their Ottoman experiences.
Film in 2009, for me
Tyson, I Love You Man, District 9, Up, Bruno, Let the Right One In, The Hurt Locker, and Man on Wire are what come to mind as my favorites of the year, without much thought. Coraline was good too. What do you recommend?
What I’ve been reading
1. The American Civil War, by John Keegan. Maybe I was prejudiced by the early reviews, but I didn't think there was much substance here. Like all of Keegan's work it is very well-written but if you have basic knowledge about the events it doesn't hold your interest.
2. In Other Rooms, Other Wonders, by Daniyal Mueenuddin. The Indo-Pak quaint narrative tale is an overexplored genre these days, but still I enjoyed this very much. It is "full of life," while sidestepping the cliches of other books that are described as such. Or were all those cliches enjoyable in the first place? Recommended, surprisingly.
3. The Soul of the Age: A Biography of the Mind of William Shakespeare, by Jonathan Bate. This book offers plenty of good information but it didn't bring Shakespeare to life for me. Should I prefer the less reliable yet more Shakespearean Stephen Greenblatt book?
4. Stitches, by David Small. By now I've concluded that I'm not good at reading graphic novels, except for the Sandman series for some reason. This much-heralded story of a sick child, mistreated by his parents, struck me as professionally done but pointless.
5. Gordon S. Wood, Empire of Liberty: A History of the Early Republic, 1789-1815. Is "magisterial" simply a fancy word for "boring"? Since I won't read past p.100 in this book, I guess I'll never find out.
6. Why This World: A Biography of Clarice Lispector, by Benjamin Moser. I loved this book. She's an interesting writer with a fascinating biography, plus the book doubles as a history of Brazil and a history of Judaism in 20th century South America. This is one of the sleeper books of the year. Here is Wikipedia on Clarice Lispector, with a good entry. This is one of the sleeper books of the year.
Will Medicare cost reductions stick?
The graph above, which portrays Medicare as a percentage of gdp, is from this SSA piece. In contrast, Matt Yglesias, Kevin Drum, and others have touted a new short essay as evidence for the claim that the Obama health reform plan will succeed on the cost control front, or at least offer a reasonable chance of succeeding, or at least offers some components which will not be reversed. Here is one key paragraph:
Virtually all of the Medicare cuts enacted in 1990 and 1993, which accounted for a significant portion of the savings in those large deficit-reduction packages, were implemented. And most of the savings enacted in 1997 other than the SGR cuts – nearly four-fifths – were implemented as well.
Given that Medicare spending growth slowed significantly more than was anticipated after 1997 – in 1999, for the first time ever, it was actually lower than the previous year’s level – and the budget was balanced in 1998 for the first time in 28 years, it is surprising that Congress did not scale back even more of the savings enacted in 1997. There is little likelihood that the positive budgetary outlook that encouraged some easing of the 1997 cuts will return in coming years.
See also Box 2 in the piece (which starts slowly, so skip ahead to the meat I am citing). If you're wondering about discrepancies between these numbers and the SSA graph, the latter is as a percentage of gdp.
My view is this: the aggregate data show that Medicare expenditures, as a percentage of gdp, have expanded at a healthy clip for every medium-run period you can find since 1973. I don't doubt that the future — like the past — may well show some shorter periods which look better than others but cost control has never worked in the past on anything but a temporary basis. Citing a bunch of short periods of time doesn't convince me; they didn't stick! And only one three-year batch of cost controls showed up, as a success, in the aggregate historical data at all. (Would you believe a worsening alcoholic who pointed to many days or even weeks where his rate of drinking was declining and also mentioned that he drank less for a few years starting in 1993? Or maybe this reminds you ever so slightly of the debates over recent global cooling and short vs. long-term trends? Most progressives recognize that a few years of cooling do not contradict the evidence about the long-term trend and yet here is an odd flip of emphasis on a few short-term improvements.)
In Figure D you'll also see that the savings from the 1993-1996 partially period are offset by later, more rapid increases in Medicare spending as a percentage of gdp.
Three additional points are worth consideration:
1. The period of Medicare cost savings, in the early to mid 1990s, coincides roughly with a more general period of cost savings in health care, due to managed care. This was soundly rejected by the American public, both in their roles as consumers and voters.
2. There will be more and more older voters in the years to come.
3. We should give at least some consideration to a "mean reversion" theory, by which current cost savings increase the pressure for future splurges. I don't want to push this view too hard, but the aggregate data, as I eyeball them, seem to imply "do not reject" for this hypothesis.
On the other side of the ledger, you might argue, pro-Obama, that the very act of passing the legislation represents a countervailing force against this long-run trend of rising costs.
You can still argue for the bill on this basis: "Congress will increase future spending on Medicare as much as it can. Any other expenditures in the meantime serve a "stuff the beast" function and slow down the future rate of growth on Medicare expenditure. We'd rather spend the money on extra coverage now, realizing that the threat of future fiscal crisis will force later Medicare cuts."
That's not my point of view, but it's what I think the debate on cost control boils down to. The best case scenario for the bill is that it won't much help cost control, may not hurt it, but by pre-emption will result in more money spent on coverage and less money spent on old people.