“We are about to witness, for the first time, the power of a fully operational Affordable Care Act (ACA).
The American Rescue Plan made 3.7 million more people eligible for the ACA’s premium subsidies. The Biden administration had already opened up enrollment after taking office, and 200,000 Americans signed up in the first two weeks. Now the administration is extending enrollment until August 15, backed by millions of dollars in advertising.
Insurers are expanding into new markets, and some who abandoned it long ago in the law’s fraught early years are now reentering. The individual mandate is gone, but, as it turns out, it may not be as important to the law’s long-term viability as originally thought. The law had been weakened since its passage by the Supreme Court and Republican opposition. So this is a new beginning of sorts.
“The ACA is right now much closer to what its advocates hoped it would be from the start,” Larry Levitt, executive vice president at the Kaiser Family Foundation (KFF), told me. “This is a true test of how effective a juiced-up ACA can be at getting us closer to universal coverage.
Taken together, come Labor Day, the country should have the clearest idea yet of how the ACA functions at full strength — and where holes in the US health system remain.”
“examining how the rollout of Medicaid in the late 1960s affected people who were children at the time.
If you got health insurance through the program as a child, he found, you were less likely to die young; you were likelier to be employed and less likely to have a disability as an adult; and all these benefits actually wound up saving the government money.”
“Researchers at Harvard University and the University of California Berkeley examined what happened when Medicare beneficiaries faced an increase in their out-of-pocket costs for prescription drugs. They found that a 34 percent increase (a $10.40 increase per drug) led to a significant decrease in patients filling their prescriptions — and, eventually, a 33 percent increase in mortality.
The rise in deaths resulted from people indiscriminately cutting back on medications when they had to pay more for them, including drugs for heart disease, hypertension, asthma, and diabetes.
“We find that small increases in cost cause patients to cut back on drugs with large benefits, ultimately causing their death,” the authors — Amitabh Chandra, Evan Flack, and Ziad Obermeyer — wrote. “Cutbacks are widespread, but most striking are those seen in patients with the greatest treatable health risks, in whom they are likely to be particularly destructive.””
“This finding challenges an important assumption embedded in American health care policy. In the 1970s and ’80s, the RAND Health Insurance Experiment concluded that small copays encouraged patients to use fewer health care services without leading to worse health outcomes. That helped establish a new economic argument for insurers to ask their customers to put more “skin in the game”: it would encourage more efficient use of health care services with no downside.
But that premise presumed people would be rational. For example, if they are being asked to pay more money for prescription drugs, they would cut back on less-valuable medications first. The Harvard/Cal study didn’t detect any such rationality. When costs went up, people just stopped filling their prescriptions for statins — high-value drugs that are effective in preventing heart attacks.
The researchers explained it like this: The way patients behaved when faced with higher out-of-pocket costs would suggest that they placed very little value on their lives. They literally stopped taking high-value drugs because of the price.”
“If patients can’t make good value judgments, the economic argument for cost-sharing starts to crumble, and it starts to seem like eliminating cost-sharing — increasing the likelihood patients will continue to take the medications they need to stay alive — would be a cheap way to “buy” people more health. As the researchers wrote, “improving the design of prescription drug insurance offers policy makers the opportunity to purchase large gains in health at extremely low cost per life-year.””
“Eliminating out-of-pocket costs would come with a price: Insurers would likely charge higher premiums to offset the loss of the copays and coinsurance that currently reduce their direct costs. But if the goal is better health outcomes, that is arguably a price worth paying.”
“In 1984, they introduced MediSave, a health savings account that was part of the country’s mandatory savings scheme, called the Central Provident Fund (CPF). Adding the MediSave bucket to the fund (which also has a bucket for housing and a bucket for retirement) forced all Singaporeans to pay something for medical care. This was followed in 1990 by the introduction of a catastrophic insurance policy called MediShield Life that is mandatory for all Singaporeans and permanent residents. Finally, in 1993, Singapore introduced MediFund, a government-managed endowment for Singaporeans who cannot cover their medical bills using the above two funding methods, cash, or family assistance. Interest from the endowment is given to certain health care institutions to underwrite the bills of patients who can’t pay. (The family help aspect is important, as MediSave funds can be used to pay the health bills of an immediate family member.) Although the country also has a supplemental private insurance market, Singaporeans under 55 must contribute 20 percent of their salaries, and their employers another 17 percent, to the CPF.
A network of public hospitals are meant to encourage what Lee Kuan Yew called a “self-administered means test.” Patients can choose any kind of hospital “ward” they like, but the subsidies slide based on consumer income and ward grade. A public hospital’s cheapest ward might sleep four patients to a room and lack air conditioning, while its most expensive wards sleep one person to a room and are cooled. While the vast majority of Singapore’s hospital beds are in public facilities, there are also private hospitals. (The situation for primary care and clinics, where care is cheaper, is the opposite: Most practices are private.)
Singapore has found that making people pay a nominal amount for every type of medical service discourages unnecessary consumption and that the spectrum of service upgrades—from shorter wait times to one-person rooms—allows prices to work as a mechanism for allocating resources. The system is greatly aided by a requirement from the Ministry of Health (MOH) that all public hospitals report to the government what they charge. The MOH then posts facility-specific averages on an easily searchable website where consumers can sort hospitals and wards by how much they charge for specific procedures. Private hospitals aren’t required to submit this information to the MOH, but many do so voluntarily. The differences are stark: The median cost of repairing a one-sided lower abdominal hernia at Singapore’s cheapest public hospital ward in 2018–2019 was $966. The median cost for the same procedure at Singapore’s most expensive private hospital was $15,729.”
“Singapore doesn’t control just the pharmaceutical choices of its residents; it also controls most of their media choices. Consider that Singapore’s buskers—the independent street performers one sees in public transportation systems and parks around the U.S.—not only need a permit (as is the case in Boston and several other American cities) but “are required to attend an audition to ensure consistency in the quality of busking activities,” according to guidelines published by Singapore’s Media Development Authority (MDA). Video games and movies “deemed to undermine public order” or that are “likely to be prejudicial to national interest” are prohibited. Press freedoms are nonexistent.”
“Even people who abhor the draconian policies in Singapore begrudgingly admit that it is a well-put-together place. The science fiction writer William Gibson visited the island for a 1993 Wired article in which he described the airport, streets, and buildings as perfectly maintained and the flora as immaculate. He could find no “wrong side of the tracks” or dilapidated infrastructure. The whole country was safe and polite and advanced. “Only the clouds were feathered with chaos,” Gibson wrote.
Following the publication of the piece, which described the country as “Disneyland with the death penalty,” Singapore banned the distribution of Wired.”
“Singapore is complex, but its core tension comes from the pairing of highly effective public and private institutions that take into account how people respond to incentives while engaging in shocking incursions on personal liberty and bodily autonomy. Imagine for a moment that it were possible for America to import what’s “good” about Singapore—the effective institutions, the economic growth, the tranquility. Could it be done without accidentally importing what’s bad?”
“Singapore is one of the few countries in the world where the public sector outbids the private sector for talent, thanks to the fact that “cabinet level pay may exceed U.S. $800,000, with bonuses attached that can double that sum for excellent performance.” The country’s culture of public service is also bolstered by “complex and overlapping incentives whereby top public sector workers are…respected highly and develop the personal networks for subsequent advancement in either the public or private sectors.””
“Bryan Caplan has argued that Singapore is unique in a way that does not bode well for policy adoption in either direction. In a 2009 paper, he summed up the “Singapore paradox” thusly: The island nation “persistently adopts policies that the democratic process would overturn almost anywhere else on earth, but the same party keeps winning election after election by a landslide. Why doesn’t a rival party promise to abolish the PAP’s unpopular policies and soar to power? How, in short, is Singapore’s political-economic equilibrium possible?”
Caplan probed several explanations in his paper, which he presented in Singapore. He ruled out the idea that the country is not actually a democracy, since it has free and fair (though not competitive) elections. Instead, he found strong survey evidence that Singaporeans were both “unusually concerned about economic performance” and deferential to the party that has delivered consistent economic growth for decades. The 2002 World Values Survey, where Caplan derived his data, reported that 58.8 percent of Singaporeans say “a high level of economic growth” should be their nation’s top priority, compared to 48.6 percent of Americans. In terms of political culture, the differences were much starker: 3.2 percent of Singaporeans reported being “very interested” in politics, and 32.8 percent were “somewhat interested” in politics. In America, the World Values Survey reported those numbers at 18.3 percent and 47.2 percent respectively.
Based on both the last eight months of social upheaval and on the United States’ decadeslong preference for swapping Democrats and Republicans in and out of federal power, Americans are almost certainly less deferential than are Singaporeans. And therein lies the rub: Being 10 percent less democratic requires American voters to trust elites and government far more than they do and, frankly, far more than they should.”
“Yana Chernyak, the assistant director of strategic initiatives at the American Enterprise Institute (and Cowen’s stepdaughter), wrote a guest post for Cowen’s Marginal Revolution blog in 2014 in which she posited that people “run in circles discussing whether Singapore is replicable based on its public and economic policies” and generally miss that “what actually makes Singapore so unique and probably impossible (or at least very difficult) to replicate” is its culture—specifically, Peranakan culture, which is passed down by the descendants of pan-Asian merchants and which holds a “positive view of commercial activity as the machine of wealth creation and basis of improving one’s life.””
“Singapore has combined classical liberal policies such as free trade, an open port, and low taxes with an authoritarian single-party government that centrally plans large swaths of the island’s economy and infrastructure, plays the role of censor in practically every media sector, canes petty criminals, and executes drug offenders. Because of, or despite, this seemingly incongruous combination, Singapore for most of the 21st century has reported higher annual gross domestic product (GDP) growth than the U.S., as well as lower infant mortality, greater trust in government, a comparable GDP per capita, and a longer life expectancy. The island city-state, as its proudest inhabitants love to mention, is also cleaner than the U.S. and has much less crime.”
“COVID-19 has forced doctors to postpone many types of surgeries, but some things can’t wait. Ophthalmologist Jay Singleton saw one man at risk of permanent blindness on a recent Friday evening in New Bern, North Carolina.
“He had a rare type of glaucoma caused by a large cataract, and the only thing to do was to remove it so the pressure would go down inside the eye,” Singleton says. “We knew it was a very real situation because he already had lost one of his eyes to the same thing.”
Singleton had all the skills and equipment necessary for the job at his state-of-the-art vision center. Unfortunately, the government won’t let him use his space for the vast majority of the surgeries he performs.
North Carolina and many other states impose a regulatory tool called a “certificate of need” (CON), which forces health care providers to prove an unmet need in the market before operating a facility, scaling up, or purchasing major medical equipment. In practice, CON laws block new competition, funneling traffic to big hospital systems—the last thing that should happen during a global pandemic.”
“”You have to pick a side,” Singleton says. “If you treat it like a business, you must allow other people to enter the market and compete with you like every other business. If you treat it like a public partnership, then you can’t enrich yourself on the backs of Medicare patients. You can’t have it both ways.””
“15 states—including California, Colorado, and most recently New Hampshire—have eliminated their CON programs.
None of these states has experienced any negative effects. Indeed, Matthew Mitchell, a researcher at George Mason University’s Mercatus Center, says states that got rid of their CON laws have more hospitals and surgery centers per capita, along with more hospital beds, dialysis clinics, and hospice care facilities.
“Forty years of peer-reviewed academic research suggests that CON laws have not only failed to achieve their goals but have in many cases led to the opposite of what those who enacted the laws intended,” he says.”
“Many states, including Connecticut, Georgia, and South Carolina, suspended their CON laws after the pandemic came to America. Other states, such as Rhode Island, rolled back CON laws at hospitals and nursing facilities but not outpatient surgery centers or hospices.
Instead of just being a temporary reprieve, these emergency actions should be expanded and made permanent.”
What’s Wrong with Employer Sponsored Health Insurance Ed Dolan. 11 6 2018. Niskanen Center. The Real Reason the U.S. Has Employer-Sponsored Health Insurance Aaron E. Carroll. 9 5 2017. New York Times. Column: The health insurance tax exemption makes care more affordable,
“Unfortunately for the theory, it’s based on some false assumptions.
For one thing, it assumes that there is currently a national marketplace for things like auto and life insurance. There isn’t. In the United States “national” insurance companies like Geico and Progressive are really networks of state-based companies. When you buy insurance, you’re buying it from a company with an office in your state, licensed to do business in your state. If you want a better deal from another state, you have to physically migrate to that state. But the good news is when you do, you can usually transfer your coverage fairly easily. Say you buy auto coverage in Virginia, and then move to Colorado. Geico of Virginia hands you off to Geico of Colorado with a few mouse-clicks. Happily, state legislatures have worked to make these sorts of handoffs seamless, by harmonizing their insurance laws.
Yes, some states have over-regulated their health insurance markets. Badly. So why not allow customers to vote with their keyboards instead of their feet? To understand why that’s not a sound idea, in our system, consider a thought experiment. Imagine if we let people pick their “governing state” with respect to taxes instead of insurance. I could, for example, opt to pay South Dakota’s dirt-cheap tax rates while still living, and using the roads and police, in high-tax New York. Why would New York stand for that? Why should it? Under our Constitution, state sovereignty isn’t a suggestion, it’s the law.
Notice how nobody is clamoring for interstate purchase of auto and life insurance. That’s because those markets work pretty well, and that’s because the coverage is individually owned. Most health insurance, alas, is not. Most Americans don’t actually own their health insurance. They participate in a prepaid group health benefit plan, usually provided through an employer or the federal government. By definition, such a plan isn’t portable because of who owns it (i.e., not you).
Half the U.S. population relies on employer-sponsored group health benefits, not because of state mandates, but because of federal tax subsidies for employer-sponsored group health benefits. End those subsidies, and more Americans will own their health insurance, and it’s a sure bet health insurance will begin to look more like auto and life.”
“Instead of trying to create an unnecessary “national marketplace” in insurance, which only makes Uncle Sam even more of a national insurance commissioner than he already is, states should simply streamline their regulations and promote portability via an interstate agreement approved by Congress.
In fact, such a compact already exists. Its purpose is to facilitate interstate comity in most forms of insurance. It just needs to be updated to cover health insurance. States haven’t bothered to update it because Uncle Sam is sitting on their chest.
So if we want to revive the true insurance market — a competitive, state-based market — we have to get Uncle Sam off the states’ chest and out of their business. And we have to change the tax laws to stop favoring group health benefits over true insurance.
Individual ownership is the holy grail. When most Americans own their insurance, it will be portable and affordable. But there is only one road to the holy grail, and it does not end in Washington. It ends in your state capital.”
“The single largest tax expenditure in the United States is for employer-based health insurance. It’s even more than the mortgage interest deduction. In 2017, this exclusion cost the federal government about $260 billion in lost income and payroll taxes. This is significantly more than the cost of the Affordable Care Act each year.”
“Let’s take a hypothetical married pediatrician with a couple of children living in Indiana who makes $125,000 (which is below average). Let’s also assume his family insurance plan costs $15,000 (which is below average as well).
The tax break the family would get for insurance is worth over $6,200. That’s far more than a similar-earning family would get in terms of a subsidy on the exchanges. The tax break alone could fund about two people on Medicaid. Moreover, the more one makes, the more one saves at the expense of more spending by the government. The less one makes, the less of a benefit one receives.
The system also induces people to spend more money on health insurance than other things, most likely increasing overall health care spending. This includes less employer spending on wages, and as health insurance premiums have increased sharply in the last 15 years or so, wages have been rather flat. Many economists believe that employer-sponsored health insurance is hurting Americans’ paychecks.
There are other countries with private insurance systems, but none that rely so heavily on employer-sponsored insurance. There are almost no economists I can think of who wouldn’t favor decoupling insurance from employment.”
“The high proportion of people who get their health insurance through their jobs is one of the most distinctive features of the U.S. health care system. According to the Census Bureau, 56 percent of the population had employer-sponsored health insurance (ESHI) as of 2017. ESHI accounts for 83 percent of all of those with private insurance of any kind. People whose health insurance is tied to their jobs far outnumber the 38 percent of the population served by government insurance of all kinds.”
“most people on ESHI appear to be satisfied with the coverage they get. A survey by America’s Health Insurance Plans (AHIP), an insurance industry group, found that 71 percent of respondents were satisfied with their ESHI plans, compared with just 19 percent who were not satisfied. An independent survey by Gallup came up with similar results, finding 69 percent of people on employer-sponsored plans to be satisfied. A study by the Employee Benefit Research Institute found that 50 percent of workers were extremely or very satisfied with their own ESHI plans, with another 39 percent somewhat satisfied.”
“Despite its popularity, though, serious health economists tell us that ESHI is “broke,” after all. No comprehensive reform can succeed unless it is phased out. This commentary examines three of ESHI’s biggest problems: job lock, which reduces labor mobility for ESHI beneficiaries; the fundamental inequity of the way the benefits of ESHI largely accrue to the highest -paid workers; and the increased fragmentation of health care finance inherent in a system administered by thousands of separate employers.”
“The term job lock refers to the tendency of employer-sponsored health insurance to discourage people from changing jobs; from starting a business of their own; or from reducing their hours to care for family members or move gradually toward retirement. Job lock undermines labor market mobility, makes it harder to match workers to the most suitable jobs, and cuts labor productivity.”
“Eichenwald suffers from a severe form of epilepsy for which medication alone costs $50,000 a year. His op-ed vividly details 40 years of struggles to secure and keep health insurance: small employers who refused to hire him because he would send the company premium through the roof; frightening gaps in coverage when he had to appeal to his parents to cover costly ER visits; a humiliating incident in which he had to beg for an entry-level job far below his qualifications just to maintain coverage.
Eichenwald’s experience is by no means exceptional. In the AHIP survey cited above, 46 percent of respondents listed health benefits as an important factor in deciding to work for their current employer. That included 9 percent who said health coverage was the decisive factor in taking the job. An even greater number, 56 percent, reported that health insurance had an impact on their decision to stay in their current job.
There is a large academic literature on the extent of job lock, well summarized in a 2015 literature survey by Dean Baker, published by the AARP Public Policy Institute. Baker notes that there is wide agreement that people with ESHI are less likely to change jobs, become self-employed, retire early, or reduce hours of work. At the same time, there are many other factors that influence labor mobility. Still, Baker concludes that even when those complicating factors are accounted for, the preponderance of evidence shows that job lock is a reality.”
“Suppose you are a head of household earning $60,000 a year, putting you in a 25 percent federal tax bracket. In that case, having your employer pay $14,000 of your insurance premium, rather than getting that much extra in cash and paying the premium yourself, saves you $3,500 in taxes. If you are a top executive in a 40 percent tax bracket, the tax deductibility of the insurance is worth $5,600.
However, according to the Tax Policy Center, some 44 percent of Americans will pay no income tax at all in 2018. Sixty percent of the nonpayers work. Even if they get ESHI, it gives them no tax benefit at all. They would be no worse off if health benefits were not deductible and if employers added the cost of their insurance to their cash pay instead.
A second factor adding to the inequity of ESHI is that low-wage workers, by and large, are not even offered the option of health benefits. The following chart, provided by the Social Security Administration, shows that only about a third of workers in the lowest fifth of the wage distribution are offered health benefits and that fewer than 20 percent accept those offers. In contrast, more than 80 percent of those in the top fifth of the wage distribution are offered health benefits and accept them.”
“Robert Kaestner and Darren Lubotsky, economists at the University of Illinois, Chicago, provide an estimate of the overall inequality of ESHI based on the combined effects of differences in tax rates and differences in offer and acceptance rates. As shown in the next chart, taken from their study, workers in the bottom fifth of the family income distribution get annual benefits of less than $500 from ESHI, while those in the top fifth get benefits averaging $4,500. What is more, the value of health benefits to well-paid workers grew substantially over the period shown in the chart, while the value for the lowest paid workers decreased slightly.”
“Fragmentation is a problem for small employers, who have little bargaining power in purchasing group policies from insurers, but also for larger employers. Many larger employers try to save on health benefit costs by self-insuring. According to Collective Health, a company that advises employers on their ESHI programs, 79 percent of companies with 200 or more employees self-insured as of 2017, up from 60 percent in 1999.
The problem is, companies that self-insure don’t always do a good job of it.”
“When it comes down to hard bargaining, health care providers, including big insurers, hospitals, and drug companies, are less fragmented than employers. Furthermore, health care is what they know best. For employers, whose main expertise lies in manufacturing, customer service, finance or other areas, health care is only a sideline. Given the structure of the system, providers will always come out ahead, driving up costs for workers and their families, who are the ultimate health care consumers.”
“people who have tried to trace its origins, like Indiana University’s Aaron Carroll, portray ESHI as an accident of history. Job-linked health benefits first became widespread during World War II when American firms faced both a labor shortage and a wage freeze. Desperate to attract employees, the story goes, they started giving out benefits like health insurance instead of cash raises. The IRS boosted the popularity of ESHI by declaring such benefits to be nontaxable. When President Truman’s attempts to establish a national health care system failed after the war, ESHI became a central element of a complex health care system whose many disparate parts have never fit together well.