Category: Law
U.S. life expectancy in perspective
From Avik Roy:
A few years back, Robert Ohsfeldt of Texas A&M and John Schneider of the University of Iowa asked the obvious question: what happens if you remove deaths from fatal injuries from the life expectancy tables? Among the 29 members of the OECD, the U.S. vaults from 19th place to…you guessed it…first. Japan, on the same adjustment, drops from first to ninth.
Did Obama Spy on Mitt Romney?
Did Obama spy on Mitt Romney? As recently as a few weeks ago if anyone had asked me that question I would have consigned them to a right (or left) wing loony bin. Today, the only loonies are those who think the question 
unreasonable. Indeed, in one sense the answer is clearly yes. Do I think Obama ordered the NSA to spy on Romney for political gain? No. Some people claim that President Obama didn’t even know about the full extent of NSA spying. Indeed, I imagine that President Obama was almost as surprised as the rest of us when he first discovered that we live in a mass surveillance state in which billions of emails, phone calls, facebook metadata and other data are being collected.
The answer is yes, however, if we mean did the NSA spy on political candidates like Mitt Romney. Did Mitt Romney ever speak with Angela Merkel, whose phone the NSA bugged, or any one of the dozens of her advisers that the NSA was also bugging? Did Romney exchange emails with Mexican President Felipe Calderon? Were any of Romney’s emails, photos, texts or other metadata hoovered up by the NSA’s break-in to the Google and Yahoo communications links? Almost certainly the answer is yes.
Did the NSA use the information they gathered on Mitt Romney and other political candidates for political purposes? Probably not. Will the next president or the one after that be so virtuous so as to not use this kind of power? I have grave doubts. Men are not angels.
The Nixon administration plumbers broke into the offices of Daniel Ellsberg’s psychiatrist in order to gather information to discredit him. They busted into a single file cabinet (pictured). What a bunch of amateurs.
The NSA has broken into millions of file cabinets around the world.
Nixon resigned in disgrace. Who will pay for the NSA break-ins?
Sentences to ponder
Medical professionals were in effect told that their ethical mantra “first do no harm” did not apply, because they were not treating people who were ill.
That concerns doctor involvement in the U.S. torture of prisoners. The pointer is from Ted Gioia.
Boonton defends ACA on Hayekian grounds
This one is from the comments:
This illustrates what I think is an advantage the ACA has, it’s remarkably flexible and dynamic. Most people who complain about it being too complicated, or too radical, neglect to consider just how complicated and radical their own pet solutions would be. From the left perspective, a national single payer system entails abolishing all insurance and having gov’t set payment levels for all existing and new medical services. You can argue back and forth whether this is a good idea, but clearly it would radically disrupt how almost every American pays for their health care. Likewise even though such a bill may be ‘less complicated’ as measured by some stupid metric like # of pages, it’s not less complicated in its implementation. Just consider the transition to single payer along would probably entail thousands of pages of regulations and multiple court cases. Now single payer advocates can argue that on net it will eliminate the complexity of having doctors billing multiple insurance companies, navigating numerous payer systems etc. But whatever the merits of that argument the system itself would not be free of complexity.
Now consider right wing proposals. Abolish employer based insurance? You’re talking disrupting how nearly 50%+ of working people have had insurance for generations now. Huge voucher schemes to buy private insurance? Err hello the exchanges are only expected to be covering 7M people, and they want to cover 300M+ with vouchers including the entire Medicare population?!!!!
While both types of ideas seem simpler when reduced to some talking points and powerpoint presentations, they really aren’t. They both consist of risky gambles, betting the entire system on a single model and throwing away all other models the economy has on the assumption that they will not be needed anymore (if you abolish employer insurance and discover you screwed up big time, getting it back is going to be hard, so is pulling back Medicare-Voucher, or a single payer system).
Now consider the idea quoted above. It basically sets a cap on subsidy growth at slightly above GDP over the long run. If that results in people being very price conscious about medical expenses and ‘bending the curve’ downwards, that’s fine. But what if people don’t want the curve bent downwards? What if they find that they are willing to spend a larger share of income on healthcare because health care innovations are more worthy than other types of innovations (i.e. such as ’3-d tvs’ or the next generation of ipads)? Then they can. What if they think gov’t should fund additional subsidies? Well that question can be taken up in the future and debated in light with what our budget situation looks like in the future. In the ACA you have a lot of flexibility for the system to evolve because it essentially let’s the multiple systems we have in the US work and allows the ones that work best to expand and the ones that work less to contract. It may very well be that one set of systems is so great that they come to dominate the market (liberals are betting private insurance can’t work in the long run, conservatives that the single payer-systems like Medicare/caid have to eventually convert to private insurance). The ACA could evolve in either of those extremes but it can also evolve into a mixed system (the elderly are on Medicare, the very poor on Medicaid and everyone else is in a robust private market where employer based coverage competes with individually purchased policies)
You also will find a response there from John Thacker.
How exactly did the ACA exchanges go askew?
Here is the real inside story of how the ACA exchanges failed, excellent piece by Amy Goldstein and Juliet Eilperin. Here is the David Cutler to Larry Summers letter. Both are essential reading.
From the comments, John Goodman on health insurance subsidies
Commenting on yesterday’s post, John Goodman writes:
Two points:
1. The premium the individual pays is not fixed as a percent of income. The subsidy is fixed, based on the second lowest silver plan premium and that amount is based on income. But the consumer is free to buy any plan. Remember, the second lowest priced silver plan may be a really lousy plan. It might have a very narrow network, for example. So, all the plans are competing against each other, with one fixed subsidy and an array of premiums. The premium an insurer charges will matter very much. 2. After 2018, the out-of-pocket premium for the second lowest priced silver plan will no longer be fixed as a percent of income. Premium subsidies as a whole will grow no faster than GDP + 0.5%, the same rate of growth that is in the Obama budget for Medicare.
The thread has some other good comments as well.
*The Internal Enemy*
The author is Alan Taylor and the subtitle is Slavery and War in Virginia, 1772-1832.
This is one of the best history books I have read, ever. Every sentence is excellent (is there higher praise?). And let me add: 1) I hate reading books about Virginia, and 2) I feel “I’ve read enough books about slavery.”
I learned a great deal about a variety of topics including The War of 1812, how the British used escaped slaves against the Americans, the tensions between western and Tidewater Virginia, the early Virginia debates about how to eventually deport the slaves. But that hardly gets at what makes this book special. More importantly than any of those specifics, it brings an entire period to life in a memorable manner.
I read this one because Jon Elster urged me too. Don’t forget, by the way:
In 1819 Virginia remained the preeminent slave state, home to nearly a third of the nation’s one and a half million slaves.
Very highly recommended, I hope it wins the National Book Award and it will be prominent on my forthcoming best books of 2013 list.
Do subsidies protect Obamacare against the adverse selection death spiral?
Jonathan Cohn writes:
What you may not realize (because few people do) is that the subsidies, by design, protect people from rising premiums. The law basically dictates what these folks pay for the typical, “silver-level” Obamacare plan, no matter what the insurer charges. This is critical. It means that rising premiums won’t affect the willingness of those people to enroll—which means, in turn, they’d still have incentive to sign up next year, as long as the technological bugs were gone and Obamacare online was working. (Subsides were a missing element of those ill-fated reform experiments in New Jersey and elsewhere.)
The economics here are tricky. Insurance companies set prices both for those who receive subsidies and for those who do not. Furthermore, the subsidy — when there is a subsidy — is determined by a process akin to a second-price auction, rather than matching the highest price in the market. (How much collusion is there anyway, once all these prices are posted?)
One question is this: pre- “pressures for adverse selection death spiral,” where is the price sitting? I don’t see an a priori answer to this query, so let’s work through two possibilities.
One option is that, at the margin, the price is already high enough that further price hikes would lower insurer profits and subsidies won’t make up for enough of that difference. So the scenario goes like this. A smaller number of “invincibles” sign up early on than initially had been expected, in part because of negative publicity about the exchanges. Providers respond by lowering service quality rather than by raising posted prices.
Think of this as the “price stickiness scenario.” One big reason for holding back on the price, and instead lowering network quality, is the adverse selection problem itself. If some of the invincibles are paying part of the price hike, higher prices will put them off. Yet, if indeed they are invincibles, vague rumors about inferior network access may not put them off much at all. They don’t expect to be using the network anyway. But of course for sick people this change in quality and access will be a problem.
On top of that, might there be some stickiness in the posted price? Many macroeconomists stress price stickiness even under normal circumstances. And that means very often sticky in the upwards direction too, for fear of alienating customers. Prices are all the more sticky in heavily regulated industries and in sectors which are under a good deal of policy debate and media scrutiny and where suppliers are not all that politically popular. Prices are even stickier when there are easy ways of raising “true net price” by lowering quality, raising wait times, restricting access and delivery speed, and so on. Those dimensions of the problem are harder for customers, regulators, and also media-mongers to monitor.
Access restrictions are also a way of checking ultimate financial risk in a way that price increases cannot be. We can thank Joseph Stiglitz for this insight, as Joe pointed out that not only are prices sticky, but quantities can be sticky too, and risk-averse firms may wish to limit how much they are on the hook for.
I see a good chance that the price stickiness scenario holds. And in that case the problem is not so much a price spiral but rather network quality moves to a much lower level and sits there.
I call the second and simpler scenario the “subsidies make up the difference” scenario.
In that scenario, the initial prices are low enough that they can be raised and the subsidies pick up the difference. The companies don’t try to game the adverse selection problem with quality decreases and most would-be buyers are covered by the subsidies at the relevant margin. The thought experiment then runs like this. The initial quality of pool applicants suddenly worsens, but this time the main effect is that posted prices go up. Because of the subsidies the real net prices to potential purchasers do not change very much and all still seems OK.
We do not know which scenario will occur, or to what extent, or in which states. But I hardly think the law is in the clear in this regard.
Henry Aaron says suck it up: health insurance cancellation update
Via Brad DeLong, here is Aaron:
Rather than apologizing for these cancellations, [the administration] should be bragging about them…. Imagine a new law enacted to promote food purity. As it is being debated, you are told ‘if you like what you eat, you can keep on eating it.’ The new law takes effect, and one day you find that the market no longer carries certain foods you have been buying… [which] included elements found to be bad for your health. The pure food act barred their use.
…People should be no more shocked when substandard insurance plans are removed from the market than they would be if food purity legislation caused some products to be removed from a grocer’s shelf….Obamacare is removing insurance products from the market that are bad for your health.
I am a big fan of Henry Aaron, but I see this response as representing a miscalculation and also showing a tin ear to the ongoing worries. I suppose I would not put Henry in charge of marketing. I have a few questions:
1. How many of the cancelled people are already receiving treatment from preferred specialists, doctors, hospitals, and so on? They are in any case the most important “subjects.”
2. How many of these people know that their new policies (if and when they can get them) will cover the same providers? How can these people find out that information — now — in an easily verified manner? And if they have to switch providers, how long will it take before their previous treatments are back up and running at an acceptable level? What kind of publicly available information is available on this question? Might their current providers start neglecting them, even before coverage is up, figuring they are “out the door” in any case?
3. How high is the anxiety level of these patients in the meantime? And must they feel they are getting a better deal from the new law, once they have shed their previous “substandard” treatments and providers? How confident should those patients feel about any promises being made to them right now? How should they feel about Aaron’s proposal for Obama administration boasting?
4. Why is Aaron so convinced that the new policies will involve no negative trade-offs?
5. We hear so much about behavioral economics, and rightly so. Doesn’t it teach us that endowment effects and status quo bias are very strong? Or are those always feelings we should be forcing people to overcome?
6. Are the best French unpasteurized cheeses — which do carry some health risk — “substandard”? Or is there an offsetting benefit? How about sushi? How about beans? They are delicious and good for your health. How about a more modest mandate for ACA? How about a stronger grandfather clause?
I thank Megan McArdle for a useful conversation related to this post.
Addendum: Via Wonkbook, here is one relevant report:
“Many new health exchanges don’t yet let shoppers see which doctors accept which insurance plans. Where exchanges do post the so-called provider lists, they often contain inaccurate or misleading information, some doctors say, including wrong specialties, addresses and language skills, and no indication whether providers are accepting new patients. Exchange officials blame the insurance industry, where inaccurate and out-of-date provider lists are nothing new. “I don’t think we realized that the underlying data had quite this number of problems. Now, it’s becoming more transparent,” said Joshua Sharfstein, Maryland’s secretary of health and the chairman of its exchange…[I]n addition to providing wrong information, the lists may give consumers a false impression of how big the networks are, some physicians say.” Melinda Beck in The Wall Street Journal.
The NSA, Google, and Yahoo: more than you thought
Via Kevin Drum, here is a new report:
According to a top secret accounting dated Jan. 9, 2013, NSA’s acquisitions directorate sends millions of records every day from Yahoo and Google internal networks to data warehouses at the agency’s Fort Meade headquarters. In the preceding 30 days, the report said, field collectors had processed and sent back 181,280,466 new records — ranging from “metadata,” which would indicate who sent or received e-mails and when, to content such as text, audio and video.
….The MUSCULAR project appears to be an unusually aggressive use of NSA tradecraft against flagship American companies. The agency is built for high-tech spying, with a wide range of digital tools, but it has not been known to use them routinely against U.S. companies.
Kevin adds:
This is apparently all done overseas in order to evade rules that govern domestic data collection. According to the story, “Two engineers with close ties to Google exploded in profanity when they saw the drawing.”
The full WaPo story is here. The program hacks into internal networks and collects documents before they are encrypted. At least on the surface, it appears Google and Yahoo were unaware of this snooping.
Update: Here are 65 things we have learned about the NSA.
Three provocative and interesting health care links
1. Josh Barro on health insurance as fiscal policy. The private market may be more statist than you think.
2. Arnold Kling on when the ACA exchanges will be working. Maybe never, or possibly very soon.
3. Chris Conover on how many people will have to change their health insurance plans? There is some exaggeration in the definitions there, but still the author makes some useful points.
Ross Douthat on the burden and incidence of ACA
As Angus has pointed out, Ross has been on a real roll lately, here is yet another good bit:
Now an effective levy of several thousand dollars on the small fraction of middle class Americans who buy on the individual market is not history’s great injustice. But neither does it seem like the soundest or most politically stable public policy arrangement. And to dig back into the position where I do strong disagree with Cohn’s perspective, what makes this setup potentially more perverse is that it raises rates most sharply on precisely those Americans who up until now were doing roughly what we should want more health insurance purchasers to do: Economizing, comparison shopping, avoiding paying for coverage they don’t need, and buying a level of insurance that covers them in the event of a true disaster while giving them a reason not to overspend on everyday health expenses.
If we want health inflation to stay low and health care costs to be less of an anchor on advancement, we should want more Americans making $50,000 or $60,000 or $70,000 to spend less upfront on health insurance, rather than using regulatory pressure to induce them to spend more. And seen in that light, the potential problem with Obamacare’s regulation-driven “rate shock” isn’t that it doesn’t let everyone keep their pre-existing plans. It’s that it cancels plans, and raises rates, for people who were doing their part to keep all of our costs low.
The full post is here.
What is the most likely path forward for the ACA exchanges?
I had lunch yesterday with a friend and I was asked that question (and I asked it in turn). My answer, with some ex post editing, was this:
1. The chance of “no smooth resolution” for the health care exchanges crisis is now 60-40. Not long ago I thought it was 20-80.
2. The Obama administration is claiming the exchanges might be ready soon to stem Democratic defections and to keep the policy locked in, but in reality they now know there is no chance for timeliness (NB: this sentence is true with 60-40 probability, not unconditionally true).
3. More parts of the thing will be working by late November, but not enough for it to serve as a functioning enrollment system, much less encourage “the invincibles” to sign up. They will figure, correctly, they don’t have to bother with the whole thing until they hear from peers, and from the media, that the process is as smooth and as easy as Orbitz. (Oddly, Tea Party attempts to get young people to resist the mandate have the counterintuitive property of increasing awareness of the sign up requirement. Disengagement, not fiery opposition, is the real enemy of the law.)
4. Come January 1, hundreds of thousands of Americans will lose their individual coverage packages for not meeting ACA standards. Most of them won’t have ready replacements. This will be a big mainstream media story, not just a FoxNews story. There will be easily identifiable victims, expressing sorrow or rage or both in front of the camera. Left-wing bloggers will express outrage that Republicans express outrage over the existence of individuals with no insurance coverage. Republicans will express outrage that left-wing bloggers express outrage, etc.
5. Democrats will propose various ACA fixes, and Republicans will reject them, claiming that the law requires a more fundamental restructuring. That standoff will not be readily resolved and it will become the “new debt-ceiling crisis.” Democratic defections will be a problem for Obama.
6. The exchanges will be mostly working by March 2014, but by then the risk pool will be dysfunctional. In the meantime, real net prices will creep up, if only through implicit rationing and restrictions on provider networks. The Obama administration will attempt to address this problem — unsuccessfully — through additional regulation.
7. By October 2014, no one will think the exchanges are a satisfactory solution, except for 17 state exchanges which will be running reasonably well. Some of the state-level exchanges, by the way, will have more serious problems than is currently evident, mostly on the back end.
8. Chris Christie will campaign against ACA and beat Hillary Clinton in the general election. Upon assuming office he will place price controls on the insurance plans in the individual market, repeal much but not all of the federal financial support for the Medicaid expansion, and keep many other parts of ACA, while claiming to have repealed the whole thing. Enough Democrats will go along with this, as public opinion will have shifted toward the Republican side on this issue. The individual market still won’t be working very well. The exchanges will be working fine in the technical sense, but skittishness, political risk, and the adverse selection death spiral will have led the insurance companies to withhold high quality policies from that side of the market.
The Travel Arbitrage Challenge
Chris, a loyal reader (natch), poses the following challenge. He is planning to travel, perhaps to Venezuela, but other countries are open. He’d like to profit from an arbitrage opportunity which could be due to official and un-official exchange rates or it could be a goods-based arbitrage. At one point, for example, you could do quite well bringing condoms to Russia but no longer. Nothing illegal especially on the import side or nothing too illegal. I get the feeling he would go for bringing in Cuban cigars if that were his best bet.
Thus, MR readers, the challenge. What country and what arbitrage?
As for me, I always eat well and get a haircut when I’m in a poor country (thanks Bela Balassa) but that arbitrage won’t pay for the trip. Can you do better?
The new Israeli export: water technology
The Israeli water industry took over the convention center here this week to show the world its bacterial sewage scrubbers and computerized shower heads, its low-flow nipples to grow high-yield tomatoes, and its early-warning mathematical algorithms to detect dribbles, leaks and bursts.
It might not have been the sexiest business conference in a country that refers to itself as “start-up nation,” but there’s a lot of money in water.
Israel wants to be seen in the water world the same admiring way it is viewed in the realm of high-tech. The country’s exports of water products have tripled in the past five years and now total $2 billion, according to Israel’s economic ministry. Its biggest customer is the United States, but new markets are opening in countries with an emerging middle class, such as Mexico, Turkey, China and India.
Because of Israel’s history of scarcity, isolation and resourcefulness, it has the jump in water management and conservation.
Here is more, and it is time to have a good long read article on Israeli water policy and technology. Here are three bits:
Israel recycles more than 80 percent of its effluents, compared with about 1 percent in the United States, the governor said.
And:
Israel is a world leader in desalination of seawater. By next year, more than a third of Israel’s tap water will come from the Mediterranean Sea and a few briny wells. Israel’s total water consumption remains nearly at 1964 levels — even though its population has quadrupled to 8 million people, according to the economic ministry.
And:
There are 280 water technology companies in Israel.
Here is further background on Israeli water policy. One obvious element here, of course, is that water policy for Israel is a matter of national security.