Author: Megan McArdle

In order to raise a fairly trivial amount of revenue, California is considering requiring any online retailer with an affiliate organization in the state to charge its residents sales taxes.  Unfortunately, the response to such moves by other states has not actually resulted in the sales tax being charged; it has resulted in the affiliates relationships being shut down, causing a net loss in tax revenue (since Amazon affiliates have to pay taxes on their income).

This would be harder to do in a big state like California–but then, Amazon has more to lose in a big state by eroding its competitive edge.  At any rate, Amazon is promising to shut down its affiliates if the law passes, though of course, it would say that in any event.

California could, of course, demand information on all the people who bought in their state.  But it would be hard to enforce a sales tax without SSNs, and I doubt that California wants to start mailing new bills to its residents–that being why they’re trying to force Amazon to collect the tax for them.  Should be interesting to watch.  I mean, unless you’re a Californian with an affiliates account.

Marty Feldstein is calling for Greece to take a holiday from the euro, with an agreement to return to the euro at a lower exchange rate that would basically guarantee a substantial instant devaluation.  Paul Krugman argues that this is impossible, citing a piece by Barry Eichengreen from several years ago:

The insurmountable obstacle to exit is neither economic nor political, then, but procedural. Reintroducing the national currency would require essentially all contracts – including those governing wages, bank deposits, bonds, mortgages, taxes, and most everything else – to be redenominated in the domestic currency. The legislature could pass a law requiring banks, firms, households and governments to redenominate their contracts in this manner. But in a democracy this decision would have to be preceded by very extensive discussion.

And for it to be executed smoothly, it would have to be accompanied by detailed planning. Computers will have to be reprogrammed. Vending machines will have to be modified. Payment machines will have to be serviced to prevent motorists from being trapped in subterranean parking garages. Notes and coins will have to be positioned around the country. One need only recall the extensive planning that preceded the introduction of the physical euro.

Back then, however, there was little reason to expect changes in exchange rates during the run-up and hence little incentive for currency speculation … In contrast, if a participating member state now decided to leave the euro area …the very motivation for leaving would be to change the parity.

Market participants would be aware of this fact. Households and firms anticipating that domestic deposits would be redenominated into the lira, which would then lose value against the euro, would shift their deposits to other euro-area banks. A system-wide bank run would follow. Investors anticipating that their claims on the Italian government would be redenominated into lira would shift into claims on other euro-area governments, leading to a bond-market crisis. If the precipitating factor was parliamentary debate over abandoning the lira, it would be unlikely that the ECB would provide extensive lender-of-last-resort support. And if the government was already in a weak fiscal position, it would not be able to borrow to bail out the banks and buy back its debt. This would be the mother of all financial crises.

That doesn’t mean that it’s impossible for Greece to exit the euro; it just means that Greece can’t do so gracefully.  Despite all the obstacles that Eichengreen describes, it would very much be possible for Greece to leave the euro, and it still might happen.  I don’t know the details of Greece’s political system, but what going off a currency peg looks like in other countries is that you give the executive substantial emergency powers (or he takes them), you freeze all the bank deposits and allow only minimal withdrawals, you revalue the currency, and then you start issuing a series of ill-advised executive orders aimed at stemming the public outrage and economic distortions that arise from these sorts of interventions in the banking system.

Obviously this is less than ideal, and not something that the chief executive with an eye to his popularity rating undertakes lightly.  But none of the other things, like cutting spending or raising taxes, seem to be very popular either–and as I understand it, things in Greece are further complicated by rampant tax evasion that makes it very difficult to raise much revenue from new taxes.  Is going off the euro obviously politically worse than the fairly radical fiscal austerity measures that Greece will otherwise have to undertake?  And if Greece fails to undertake them, will the other members of the euro come through with a bailout anyway?  I suspect they’re going to have to, because I’m not sure I see any politically feasible way for Greece to get its budget under control.

It’s worth noting that these difficulties in cutting spending, once people have gotten used to it, are one of the most powerful libertarian arguments against new entitlements, no matter how well-intended those new entitlements may be.

Join the conversation about this story »

See Also:

• Italy Now Suspected Of Using Derivatives To Hide Their Debt Problem, Just Like Greece
• Everyone In Europe Has Been Cheating On Each Other
• It’s Been A Rough 24 Hours In Euro-Land

Marty Feldstein is calling for Greece to take a holiday from the euro, with an agreement to return to the euro at a lower exchange rate that would basically guarantee a substantial instant devaluation.  Paul Krugman argues that this is impossible, citing a piece by Barry Eichengreen from several years ago:

The insurmountable obstacle to exit is neither economic nor political, then, but procedural. Reintroducing the national currency would require essentially all contracts – including those governing wages, bank deposits, bonds, mortgages, taxes, and most everything else – to be redenominated in the domestic currency. The legislature could pass a law requiring banks, firms, households and governments to redenominate their contracts in this manner. But in a democracy this decision would have to be preceded by very extensive discussion.
And for it to be executed smoothly, it would have to be accompanied by detailed planning. Computers will have to be reprogrammed. Vending machines will have to be modified. Payment machines will have to be serviced to prevent motorists from being trapped in subterranean parking garages. Notes and coins will have to be positioned around the country. One need only recall the extensive planning that preceded the introduction of the physical euro.

Back then, however, there was little reason to expect changes in exchange rates during the run-up and hence little incentive for currency speculation … In contrast, if a participating member state now decided to leave the euro area …the very motivation for leaving would be to change the parity.

Market participants would be aware of this fact. Households and firms anticipating that domestic deposits would be redenominated into the lira, which would then lose value against the euro, would shift their deposits to other euro-area banks. A system-wide bank run would follow. Investors anticipating that their claims on the Italian government would be redenominated into lira would shift into claims on other euro-area governments, leading to a bond-market crisis. If the precipitating factor was parliamentary debate over abandoning the lira, it would be unlikely that the ECB would provide extensive lender-of-last-resort support. And if the government was already in a weak fiscal position, it would not be able to borrow to bail out the banks and buy back its debt. This would be the mother of all financial crises.

That doesn’t mean that it’s impossible for Greece to exit the euro; it just means that Greece can’t do so gracefully.  Despite all the obstacles that Eichengreen describes, it would very much be possible for Greece to leave the euro, and it still might happen.  I don’t know the details of Greece’s political system, but what going off a currency peg looks like in other countries is that you give the executive substantial emergency powers (or he takes them), you freeze all the bank deposits and allow only minimal withdrawals, you revalue the currency, and then you start issuing a series of ill-advised executive orders aimed at stemming the public outrage and economic distortions that arise from these sorts of interventions in the banking system.

Obviously this is less than ideal, and not something that the chief executive with an eye to his popularity rating undertakes lightly.  But none of the other things, like cutting spending or raising taxes, seem to be very popular either–and as I understand it, things in Greece are further complicated by rampant tax evasion that makes it very difficult to raise much revenue from new taxes.  Is going off the euro obviously politically worse than the fairly radical fiscal austerity measures that Greece will otherwise have to undertake?  And if Greece fails to undertake them, will the other members of the euro come through with a bailout anyway?  I suspect they’re going to have to, because I’m not sure I see any politically feasible way for Greece to get its budget under control.

It’s worth noting that these difficulties in cutting spending, once people have gotten used to it, are one of the most powerful libertarian arguments against new entitlements, no matter how well-intended those new entitlements may be.

As the proud owner of a well-used Mini, I feel compelled to weigh in on Ryan Avent’s proposal for single-passenger vehicles that don’t guzzle so much gas, or use so many materials.  He makes a pleasingly contrarian argument that a lot of the problem is government safety regulations, which naturally appeals to me.

All that said, it won’t work.  First, because you’d be surprised how much room you need for groceries–a full run for the two of us can pack the mini’s back pretty easily.  And second, it’s too dangerous.

It’s dangerous enough for motorcycles to share a road with cars, but
motorcyles are maneuverable and their riders don’t have big blind spots
like you do in a regular vehicle.  A slightly better-armored golf cart
cannot share a road with trucks, which they would have to even in
train-accessible suburbs.  I am pretty reluctant to drive my Mini on
long highway trips, for just this reason.

Differential speeds
are a major cause of accidents, as is the inability to accelerate
quickly. And of course, even in single-car accidents, lighter vehicles
are more dangerous.  You’re not talking about American auto safety
regulations; you’re talking about the laws of physics; if you’re going
to smash into something, you want as much stuff around you as possible
to absorb the shock.  In a two car accident, the death rate would be
enormous, since even my mini could crush one of these things.

Meanwhile, how many people want to park and insure an extra vehicle?

Such
a system would be fine in a country where that’s all that anyone
drove.  But that’s not the country we live in, and even if we did away
with large passenger vehicles, we’d still have to put all the cargo
trucks somewhere.

Scientists now think that King Tut may have died of malaria.  As the fellow who sent me the link dryly noted, King Tut did not have good comprehensive health insurance.

All kidding aside, this is a good excuse to meditate on just
how rich we are. King Tut was probably the wealthiest man in the world
during his time. He died of something that wouldn’t kill the most
abjectly immiserated welfare mother in the United States today, because
of a combination of public health efforts, and cheap antimalarial drugs.

You
always need to factor in things like this when you talk about changes
in living standards over time.  All the positive changes in society
mean that the absolute difference between the income of Bill Gates and
the man who valets his car is larger than it has ever been in history. 
But the actual difference in comfort between the two of them is
probably much smaller than the difference between JP Morgan and his
stableboy.  And both Gates and the valet are almost immeasurably better
off than their predecessors.

I’m watching Obama claim that it is “largely thanks to the Recovery Act” that the recession didn’t become a depression.  I supported the stimulus, and still do.  But this claim is ludicrous.

There’s really very little question that the main mistake which created the Great Depression was allowing the banking system to collapse.  There were a number of reasons this happened, most notably horrific Federal Reserve policy and our insistence on sticking to the gold standard.  If FDR hadn’t taken us off the gold standard and turned the banking system around, the Great Depression would have been even worse than it was.

So the main reason we didn’t have the Great Depression is that the Treasury intervened to prop up financial institutions, while the
Federal Reserve pumped money into the economy with a firehose.  Special
guest star credits go to the FDIC, which prevented the bank runs that
crippled so much of our economy in the early 1930s.  If you want to
credit a government program, credit TARP, not ARRA.

Did the
stimulus help?  Sure.  But recovery.gov currently has a nifty graphic
showing that of ARRA’s $787 billion in budget authority, the government
has currently disbursed about $287 billion.  You’d have to posit some
really remarkable multipliers for the stimulus to think that this prevented us from sliding into the Great Depression.

For comparison’s sake, in 1930, GDP
fell by 8.6% in real terms.  In 2009, the BEA says that it fell about
2.4%, or about $300 billion.  Had it fallen by anything close to 8%,
that would have meant a decline of roughly a trillion dollars.

So
the administration is claiming that by spending less than $300 billion,
it managed to prevent more than $700 billion in economic decline–in
other words, that the multiplier for their spending was higher than
two.  They’re saying that every dollar they spent increased GDP by more
than $2. 

That’s a pretty high estimate, especially when you compare it to the CBO’s estimates
of multipliers for various components of ARRA.  Even if you take the
top end of the range they give for every one of those multipliers,
you’d still fall short, because the bits that give you the most
stimulative bang for your buck–the direct government spending–have so
far disbursed the least money.

Of course, if you listen to someone like Robert Barro,
you’d use a multiplier of more like 0.6 or 0.7, implying that the
administration has probably so far boosted GDP by maybe $150 billion,
or about 1%. 

1% is not nothing.  But it’s not the difference
between us and a band of desperate Okies hoping that the old Model T
will make it all the way to California.

I hadn’t realized, when I wrote yesterday’s post, how many people are emotionally invested in first dollar coverage. 

To the extent that we’re worried about health insurance coverage, I thought that most of us were agreed that we were talking about the benefits of catastrophic coverage, not this insane scheme we have in the US where catastrophic insurance for the kinds of risks most people can’t finance comes bundled with first-dollar coverage for ordinary treatment of the sort that most people used to pay for out of pocket.

Color me chastened.  So let me expressly stake out some more controversial ground on health care policy:  for most people, first-dollar coverage is probably not a significant driver of health.  If most people paid for normal care for everyday ailments out of pocket, I don’t think there would be much effect on aggregate national health.  What benefit there is from first-dollar coverage comes from covering low-income people with chronic conditions, at least as I understand the literature. 

Which is not, to me, all that surprising.  Insulin and checking blood sugar saves the lives of diabetics, and as a result, most people will find the money they need to pay for supplies, so that compliance problems are driven more by the pain-in-the-ass factor than the price.  But if you’re severely income constrained, you’ll chose eating, rent, or shoes over testing strips.  I don’t think it’s an accident that natural experiments involving Medicaid expansions or terminations tend to find relatively large effects.

What first dollar coverage for the affluent does is drive costs.  Take the recent kerfuffle over mammograms. Mammograms are very uncomfortable, and of course, you don’t want to shoot any more radiation into yourself than necessary, so women should have been excited by the news that you probably don’t need one until you’re fifty.  Instead they were outraged.  Since this was about spending other peoples’ money, naturally we want the right to spend as much of it as possible, even if it’s not very useful. 

Now, maybe the recommendations were wrong–but if that’s the case, in a world without ample first-dollar coverage, you’d simply discuss that with your doctor, not write the damn newspaper. 

This is hardly the only example.  I doubt it’s coincidental that the health care markets where people pay their own way are the ones where there are more real efforts at cost control, like plastic surgery, fertility, and vision care.  (I recently heard a local fertility clinic on the radio offering a money-back guarantee if they take your case!)  With all the layers in between consumers and the providers in the ordinary market, the natural battle between consumers seeking better value and producers seeking higher prices is terribly distorted in ways that don’t make us healthier.

I think that the argument for catastrophic coverage is much stronger for a variety of reasons, which is why I’d like to see the government pick up the tab for expenses that total more than 15% or 20% of annual income.  There’s certainly also a case for providing basic care and treatment for certain chronic conditions to the poor, though even in that case, I’d like to see us at least try to handle the problem with a combination of catastrophic insurance, and better income supports.  But if that failed–and it might–I’d absolutely support public provisions of those sorts of treatments to lower income Americans, along with no-brainers like prenatal and infant care.

But for the vast swathes of the middle classes? No, I really don’t think that having extraordinarily generous benefits that insulate them from almost all the cost of their medical treatments is improving either our health, or the nation’s financial condition. In fact, I think it’s the very reason that ordinary treatments are so inflated that they’ve become “unaffordable”.  Call me cynical, or an ideologue.  But I think we’d be better off with markets in every day care, and insurance for the catastrophic stuff that individuals really can’t afford.

I should note, however, that very smart health care economists like David Cutler disagree with me.  Cutler notes that compliance rates with many chronic diseases are very low.  For example, majority of people given hypertension drugs discontinue them within a year, because the drugs have side effects, and the hypertension doesn’t . . . until you have a stroke.  His reasonable point is that with compliance so low already, we should be trying to eliminate any possible difficulties.  This is worth considering, but I’m not sure that this is necessarily the best way to achieve these goals, nor the most cost effective one.  What would happen if we took all the money we’re plowing into the middle class, and invested heavily in a visting nurse’s service?  I know that I was a lot more religious about monitoring my peak flows when the nice nurse from the insurance company called to badger me.

Join the conversation about this story »

See Also:

• Health Care Reform Will Create Litigation Explosion — So What?
• Deficit Hawk Logic: Hummers, Howitzers, And Helicopters, Yes. Health Care, No
• Stop Crying About Massachusetts And Pass Health Care The Hard Way

I hadn’t realized, when I wrote yesterday’s post, how many people are emotionally invested in first dollar coverage.  To the extent that we’re worried about health insurance coverage, I thought that most of us were agreed that we were talking about the benefits of catastrophic coverage, not this insane scheme we have in the US where catastrophic insurance for the kinds of risks most people can’t finance comes bundled with first-dollar coverage for ordinary treatment of the sort that most people used to pay for out of pocket.

Color me chastened.  So let me expressly stake out some more
controversial ground on health care policy:  for most people,
first-dollar coverage is probably not a significant driver of health. 
If most people paid for normal care for everyday ailments out of
pocket, I don’t think there would be much effect on aggregate national
health.  What benefit there is from first-dollar coverage comes from
covering low-income people with chronic conditions, at least as I
understand the literature. 

Which is not, to me, all that
surprising.  Insulin and checking blood sugar saves the lives of
diabetics, and as a result, most people will find the money they need
to pay for supplies, so that compliance problems are driven more by the
pain-in-the-ass factor than the price.  But if you’re severely income
constrained, you’ll chose eating, rent, or shoes over testing strips. 
I don’t think it’s an accident that natural experiments involving
Medicaid expansions or terminations tend to find relatively large
effects.

What first dollar coverage for the affluent does is
drive costs.  Take the recent kerfuffle over mammograms. Mammograms are
very uncomfortable, and of course, you don’t want to shoot any more
radiation into yourself than necessary, so women should have been
excited by the news that you probably don’t need one until you’re
fifty.  Instead they were outraged.  Since this was about spending
other peoples’ money, naturally we want the right to spend as much of
it as possible, even if it’s not very useful. 

Now, maybe the
recommendations were wrong–but if that’s the case, in a world without
ample first-dollar coverage, you’d simply discuss that with your
doctor, not write the damn newspaper. 

This is hardly the only
example.  I doubt it’s coincidental that the health care markets where
people pay their own way are the ones where there are more real efforts
at cost control, like plastic surgery, fertility, and vision care.  (I
recently heard a local fertility clinic on the radio offering a
money-back guarantee if they take your case!)  With all the layers in
between consumers and the providers in the ordinary market, the natural
battle between consumers seeking better value and producers seeking
higher prices is terribly distorted in ways that don’t make us
healthier.

I think that the argument for catastrophic coverage
is much stronger for a variety of reasons, which is why I’d like to see
the government pick up the tab for expenses that total more than 15% or
20% of annual income.  There’s certainly also a case for providing
basic care and treatment for certain chronic conditions to the poor,
though even in that case, I’d like to see us at least try to handle the
problem with a combination of catastrophic insurance, and better income
supports.  But if that failed–and it might–I’d absolutely support
public provisions of those sorts of treatments to lower income
Americans, along with no-brainers like prenatal and infant care.

But
for the vast swathes of the middle classes? No, I really don’t think
that having extraordinarily generous benefits that insulate them from
almost all the cost of their medical treatments is improving either our
health, or the nation’s financial condition. In fact, I think it’s the
very reason that ordinary treatments are so inflated that they’ve
become “unaffordable”.  Call me cynical, or an ideologue.  But I think
we’d be better off with markets in every day care, and insurance for
the catastrophic stuff that individuals really can’t afford.

I
should note, however, that very smart health care economists like David
Cutler disagree with me.  Cutler notes that compliance rates with many
chronic diseases are very low.  For example, majority of people given
hypertension drugs discontinue them within a year, because the drugs
have side effects, and the hypertension doesn’t . . . until you have a
stroke.  His reasonable point is that with compliance so low already,
we should be trying to eliminate any possible difficulties.  This is
worth considering, but I’m not sure that this is necessarily the best
way to achieve these goals, nor the most cost effective one.  What
would happen if we took all the money we’re plowing into the middle
class, and invested heavily in a visting nurse’s service?  I know that
I was a lot more religious about monitoring my peak flows when the nice
nurse from the insurance company called to badger me.

There is more to a market than buying or selling.  Armchair economists and parlor libertarians often act as if all you need to make a market is to remove the government barriers to trade.  This can be true (ag subsidies, I’m looking at you!), but in many places it’s nowhere near enough.  You need the social norms that support market trade, and you need to set good rules by which trade happens.  What we did to Russia is a good example of why the “get government out of the way” theory is not sufficient.

Matt Yglesias has a post on school choice that makes this point very well, I think, citing a paper by McLeod and Urquiola:

Friedman (1962) argued that a free market in which schools compete
based upon their reputation would lead to an efficient supply of
educational services. This paper explores this issue by building a
tractable model in which rational individuals go to school and
accumulate skill valued in a perfectly competitive labor market. To
this it adds one ingredient: school reputation in the spirit of
Holmstrom (1982). The first result is that if schools cannot
select students based upon their ability, then a free market is indeed
efficient and encourages entry by high productivity schools. However,
if schools are allowed to select on ability, then competition leads to
stratification by parental income, increased transmission of income
inequality, and reduced student effort–in some cases lowering the
accumulation of skill. The model accounts for several
(sometimes puzzling) findings in the educational literature, and
implies that national standardized testing can play a key role in
enhancing learning.

The
rules surrounding markets matter a lot–and the reason we don’t know
this is that the rules that work have disappeared into the background,
faded out of our consciousness, become part of the miasma of “the
market”.  For example, I recall a web debate years ago in which someone
made the standard point that cartels are very difficult to hold
together, which means anti-trust rules about this sort of thing have
dubious utility.  I believe it was Eugene Volokh who pointed out that
this was true . . . but only because courts refused to enforce cartel
agreements.  If courts did enforce them, cartels would work pretty
well–which is why we still have professional sports leagues.

Luckily,
this is the sort of rule that most voucher programs enforce–and
because I find this paper pretty convincing, I’d say they should
continue to.

Ezra asks why, if I think the benefits of health insurance are so minimal, I have health insurance.  Revealed preference!  Gotcha!

But the answer as to why I have health insurance is simple:  my employer pays for it.  If my employer didn’t pay for it, I wouldn’t have it.  I’d buy a catastrophic policy from a reputable insurer to cover any amount that might bankrupt me, and self-insure for everything else.  That would probably cost me a little more than what I pay The Atlantic for my first-dollar coverage, so I opt for the first-dollar coverage.  It’s not like I get the money The Atlantic is spending on my benefits back if I choose to go without.

But do I think I would be noticeably more likely to die if I did give up my policy?  Certainly not for the next twenty years, because I am unlikely to get cancer much before 65, and everything else that might kill me would be treated on an emergent basis, where insurance probably wouldn’t affect my outcomes nearly as much as the fact that I am an upper middle class professional with a (soon to be) husband who writes about health care policy for a living and a father who used to work for the New York City health and hospitals corporation, both of whom will no doubt be sitting on top of the doctors and the hospital bureaucracy to make sure I get excellent care.  At 65 I qualify for Medicare, if it hasn’t bankrupted the government.

Morbidity?  Maybe.  But we’re more likely to take out a second mortgage to cover physical therapy than we are to go without.

I’m pretty sure my life would be, on net, better if I had the cash wages and a catastrophic policy instead of the health benefits.  As someone who’s moderately sickly, I’ve spent a lot of my life worrying over false positives from tests of dubious pertinence, and no time at all treating conditions we caught early.  But the system is not set up to facilitate real insurance; it’s set up to hide the cost of medical treatment from as many people as possible, because we have developed a social belief that no one should have to consider the cost of medical care, except maybe your friendly neighborhood bureaucrat.

All of this hints at the problems that plague many of the studies Ezra and others have been citing, showing marvelous results from insurance:  as I said in the beginning, uninsured are not like the rest of us.  Do I think that my risks would shoot up to match those found by the studies Ezra likes?  No I do not, and I doubt that Ezra would try to argue otherwise.  I have immense resources at my disposal, most of them non-monetary.  There are many ways in which I would like to even out those differences, but privilege cannot be transferred into someone else’s checking account.  Indeed, as libertarians are fond of pointing out, government systems can frequently end up catering to privilege even more than the private sector; check out which post codes in Britain or Canada get the best medical services, or check out the massive disparities between the educations received by the poor children in New York City public schools, and the educations received by the middle class kids whose parents lightheartedly imagine that by siphoning an excess share of the system’s resources into their little darlings, they are somehow supporting the cause of educational equality.

But I digress.

If I suddenly lost my health insurance, I would still be a comfortably middle class person who would pay my doctor’s bills out of pocket, and wouldn’t miss an important checkup with the pulmonologist or the immunologist.  I would be, well, pretty much like I was during the years that I was uninsured, and spending quite a large portion of my meager earnings on doctors bills.  I might end up bankrupt.  But outside of the kind of fluke that afflicts any system from time to time, I would not end up dead.

Now, bankruptcy is a real problem with the healthcare system, although advocates for a national system tend to attribute them all to medical bills, when lost income seems to be a much larger problem.  Based on what I know about the literature, I doubt that even a very generous national health care system would reduce medical bankruptcies by as much as half.  Households whose expenditures are predicated on having two incomes are simply in a very bad position when one of the two wage earners gets sick.  Nonetheless, I’d like to see us move to a system of government reinsurance of at least basic medical expenses over a certain percentage of income.

But not because I’m sure it would make us all noticeably healthier.  I have rather modest expectations along those lines.  But as fond as I am of easy bankruptcy, I’d still like to see less of it, particularly in cases where no amount of planning could have enabled an individual to avoid it.  Catastrophic medical bills fall into that category–and unfortunately, in many states regulations have made it impossible for people to obtain sensible catastrophic coverage.

While looking for information on Deval Patrick’s new idea for controlling costs in Massachusetts (more on which later), I came across this opinion piece in the Huffington Post, titled “New York City Sinks If Health Care Reform Fails”.  I find this a bit surprising, because first of all, New York City already has a third of its residents on Medicaid; and second of all, the city already has all the man features of the proposed insurance plan except the mandate.  What it doesn’t have is the taxes, which are likely to fall much more heavily on New Yorkers than almost any other jurisdiction, when you consider the combination of high unionization and high incomes.

This is a question my father has been asking for a while, and I
don’t have a good answer for:  what is the distribution of the taxes
and benefits for the proposed plans?  While whatever pooling benefits
arise out of the exchanges and mandate probably stay in state, the
revenue side probably represents a net transfer from blue states to red
states.  That may be why Scott Brown won an election promising to take
down the plan (though conservatives would probably argue that the
declining popularity of Massachusetts’ own version may have more to do
with it). 

Thomas Frank would no doubt be rolling in his
grave, except that thankfully as far as I know he’s still alive and
well.  Does the political economy of this represent something
fundamentally wrong with American politics?  Or is it a tribute to our
admirable willingness to look beyond parochial self-interest?

Here’s an angle on the Greek financial crisis I hadn’t considered: Victor Matheson, a member of the Sports Economist group blog, argues that one reason the Greeks wound up in such deep financial trouble is that they went deep in hock to pay for the Olympics:

Greece’s federal government had historically been a profligate spender, but in order to join the euro currency zone, the government was forced to adopt austerity measures that reduced deficits from just over 9% of GDP in 1994 to just 3.1% of GDP in 1999, the year before Greece joined the euro.

But the Olympics broke the bank. Government deficits rose every year after 1999, peaking at 7.5% of GDP in 2004, the year of the Olympics, thanks in large part to the 9 billion euro price tag for the Games. For a relatively small country like Greece, the cost of hosting the Games equaled roughly 5% of the annual GDP of the country.

Of course, the Olympics didn’t usher in an economic boom. Indeed, in 2005 Greece suffered an Olympic-sized hangover with GDP growth falling to its lowest level in a decade.

That would certainly follow the pattern of crazy civic development projects in which stadiums and museums are supposed to somehow substitute for everything that is missing in the local economy.  But the governments in question don’t usually end up in receivership.

Fun Olympic factoid of the day:  the television news yesterday reported that the Whistler ski complex had essentially been developed in the hopes of the area someday scoring a winter Olympics.  I have no idea if this is true, but it seems both plausible and deeply troubling. 

Join the conversation about this story »

See Also:

• Olympics Shortens Luge Track But Refuses To Admit It’s Because The Track Is Absurdly Dangerous
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For some reason, everyone I’ve seen who has so far responded to my piece on mortality and the lack of insurance has pulled exactly the same debater’s trick:  they restate my argument in maximalist form, and then proceed to really kick the hell out of the strawman they’ve created.  I mean, there’s hay and shreds of fabric on the ceiling of offices three floors above them.  Button eyes flying off so fast that several have achieved escape velocity. Crows shrieking in terror as far away as Fresno and Marseilles.  It’s a stunning display of . . . something.

But I have not asserted that insuring the uninsured wouldn’t
save anyone’s lives, so I don’t know why they’re making this argument
while linking to me.  What I said is, the studies so far done
often cannot exclude the possibility that there is no effect–this is
true of one of the two studies that IOM/Urban relied upon, and also of
the largest observational study done to date, which found no effect. 
That is not the same as saying there is no effect.  Health
data, like economic data, is very noisy.  Sometimes effects that we’re
pretty sure exist just can’t be easily teased out of the data . . .
like, oh, I dunno, the effectiveness of fiscal stimulus, say.

What I am
saying is that we don’t know how big the effect is. Refuting me
involves, not saying that well, here’s another study showing some
effect, but rather, taking a stand and saying we do know how big the effect is, or at minimum, that we can prove it’s probably at least 20,000 people a year, the figure I was discussing.

Because
of course, size matters.  If you want to argue in favor of a national
health care system on the basis of improvements in mortality, then the
number really has to be quite large.  By 2019, the CBO expects the
government to be spending just about $163 billion more the exchanges,
and the Medicaid/S-Chip expansions.  (About $100 billion of that is to
be offset by Medicare and other cuts–but I’m just trying to isolate
how much we’re going to spend to expand coverage, since we could do the
coverage expansion without the Medicare cuts, or the Medicare cuts
without the coverage expansion–and doing the latter would give us
money for other things, so there is an opportunity cost to using them
for this). 

If 1,000 people die a year, that means that we
will be spending $163 million per life saved.  If the number is 5,000
we would be spending $33 million.  In fact, you need the number of
people dying from lack of insurance each year to be quite large–more
than 20,000–to get the dollars-per-lives-saved within the ranges that
say, the EPA or the NHTSA use for doing cost-benefit analyses on
regulations.

Now, obviously, as I’ve also said repeatedly, there
are reasons beyond mortality that we might support this system. 
Mortality is only one element, albeit an important one.

But I
think that journalistic hunger for “a number” has resulted in some very
rough numbers with a lot of weaknesses being adopted as a fact in the
debates.  They’re not facts, they’re very rough guesses, and they
shouldn’t have been used as a selling point for this plan without at
least some investigation of how reliable they were.  Moreover, I know
that the people arguing with the study understand the problems, because
they suddenly rediscovered them in regards to the data on deaths before
and after age 65.  A lot of people are arguing that we should ignore
the aggregate data on Medicare mortality statistics in favor of Card’s
paper on the discontinuity between health outcomes for ER admits who
are just under 65, and those just over.

I see the argument for
using easier-to-measure subgroups in an attempt to isolate causality. 
But here’s the thing:  you cannot say, well, aggregate data isn’t very
good for capturing causality, and also cite the figures from the Urban
Institute, or Himmelstein et. al. as if they had some meaning.  Those
data are far worse than the Medicare data, because at least the
Medicare data gives you a natural experiment, and it doesn’t try to
isolate “the uninsured” on the basis of their insurance status on a
single day.

It also rather misses the point of why I find the
aggregate Medicare figures so striking, something I’ve been hammering
out in private emails for several days.  People under the age of 55
account for a very, very small proportion of deaths in this country. 
It’s after 60 that you’d expect to be getting the largest mortality
benefit from expanding insurance coverage.  If switching people to
government-run insurance at the age of 65 doesn’t produce any
measurable improvements in the mortality rate of a population with a
high mortality rate, then how big an effect could a national health
care system for younger people have on mortality outcomes?  Would it
even register in national statistics?  Is this the right use of $163
billion? I mean, we can say that a policy is a success if it saves even
one life, but it is not actually possible to run a country this way.

If
you want to see the argument only in maximalist terms, I’d like to see
some of the people who have pushed my argument to its maximalist
conclusion endorse some maximalist propositions of their own.  If
you’ve used the 20,000 or 45,000 figures regularly, approvingly cited
the Himmelstein et. al. bankruptcy data, and stated as a fact that the
health care bill will reduce deficits because the CBO said so, you
should have no trouble signing on to the following propositions:

• Since
  I think that the Urban and/or Himmelstein figures are reliable, and at
  least 60% of the uninsured will be covered by the new plans, I expect
  that mortality rates among those under 65 will begin a discontinuous
  fall by late in this decade.  I expect them to drop by at least 10,000
  (1.5%) and very possibly by 22,500 (3.5%), or even more, by 2025.
• I
  expect that within 5 years of implementing this plan, we will see a
  kink in the bankruptcy curve representing an at least 20% decline in
  the overall level of bankruptcies from trend.
• Since I believe
  that the CBO’s accuracy at predicting the future with their reports are
  very high, and conservatives who question them are disingenuous, I do
  not believe that total government expenditures on health care will rise
  by more than $90 billion a year + [the health care CPI  x current
  expenditures] + the annual cost of the doctor fix.
• Since I have
  frequently cited international mortality and infant mortality figures
  as an example of the failure of the American health care system, I
  expect that within 10 years of implementing this plan, we will have
  begun to substantially close the gap between the US and other developed
  nations with better mortality statistics.  I believe that this plan
  will ultimately reduce the mortality gap by at least a third within 25
  years, and virtually eliminate it within 50 years.

I doubt
that many people want to take the maximalist position, because, well,
the universe is messy.  I don’t either, which is why I didn’t take it. 
I don’t think we know how many people die every year from lack of
health insurance.  I think the number is probably smaller than Urban,
because I expect the pressure from the unobserved variable bias to be
upward.  But I could be wrong.  Further than that, I am unwilling to
say.

I want to talk a bit more about why I dislike the Himmelstein et. al. study that found more than half of all bankruptcies were due to medical reasons.  There are a few reasons that I don’t find their work very convincing.  First, the rate of respondants attributing the bankruptcy to medical problems was more in line with other studies I’ve seen, at 30-40%.  The extra folks come from their addition of, for example, people who had medical bills that total 5% of income.  Now, having medical problems is one of the most socially acceptable reasons for bankruptcy (compared to other major causes like divorce, overspending, or a gambling or drug addiction, so we’d normally expect people to overemphasize the medical problems compared to other factors.

They also had a pretty low response rate, which isn’t exactly
surprising, but of course, when you’ve got a response rate well under
50%, you have to worry quite a bit about selection bias.

But the
biggest problem is the timing.  They conducted the study over a period
that roughly corresponds with the first quarter of 2007.  This probably
doesn’t mean anything to most of you, but in 2005, Congress enacted a
bankruptcy reform that went into effect in late autumn.  Partly due to
the press hype, which exaggerated how hard it was going to be to file
bankruptcy in the future, people freaked out.  Anyone who even thought
they might file bankruptcy, rushed to do so before the law took effect. 
The result was a giant spike, and then an even more giant drop.

The
paper sort of deals with it, but all they say is that there’s no
difference between the people who filed in 2007, and previous filers.  I
have no idea how they can say this, since this is actually the subject
of their study–if we had really good data on the average percentage of
medical bankruptcies, they wouldn’t be studying the question.

Here’s
their explanation:

BAPCPA’s effects appear
nonselective(7).  Current filers differ from past ones mainly in having
struggled longer with their debts.  New restrictions fall equally on
medical and nonmedical bankruptcies, with no preferences for medical
debts or sick debtors.

But that’s not quite what the
paper they cite says; it only studies income and assets, not other
characteristics of the debtors.  And there are a number of reasons that
the law might have favored sick debtors:  sick debtors might have found
it easier to meet the means test; the new law tinkered with the rules
surrounding secured debt like auto payments, which made it relatively
more attractive for people with unsecured debts like medical bills to
file; and people with medical bills might find it harder to time their
bankruptcies.

Now, maybe none of these things did affect the
sample.  But I don’t think you can look at the first quarter of 2007 and
say this is a period from which you want to draw broad generalizations
about bankruptcies:You’re still in an
atypical period after a huge shock to the system.  Now, maybe there was
no difference between those who rushed to file, and those who didn’t. 
But I wouldn’t want to bet on that.  And I can tell a plausible story
where the people with medical problems can’t or won’t engage in the kind
of strategic behavior that lets people either predict, or stave off
bankruptcies . . . which makes me wonder why they chose the period they
did.  Everyone I interviewed at the time made it very clear that they
thought we were in an atypical period . . . this was the pro-debtor
story, because if bankruptcy rates stayed low, it meant that there had
indeed been a fair number of strategic bankruptcies, as the banker’s
associations had been arguing.

They didn’t stay low, as you can
see; the data runs only to June 2009, but there’s little doubt they’re
still mounting.

Now look at the “clinical findings” section of
their paper:

• 62% of bankruptcies have medical causes
• Most
  filers are well-educated and middle class; 3/4 have health insurance
• The
  number of medical bankruptcies has increased 50% since 2007

Their
press releases and the interviews made it even clearer that they were
making a case for national health care, based on the fact that the
current system was pushing everything into bankruptcy.

Now, given
the quality of the data they had, this is way, way, way too strong a
statement of what they found.  This was also true of their earlier
study, which defined everyone with medical bills over $1,000 as having a
“medical bankruptcy”.  Somehow, the parameters they choose always give
rise to the conclusion that the medical system is wreaking catastrophe
on the maximum number of people.

I find it very hard to trust the
studies they do because of this.  In general, I’m really skeptical of
papers from activist groups, which is why you rarely see me do more than
pluck a very basic data set based on government or similar figures from
any advocacy group or think tank that agrees with my ideological
priors.  So the way this paper was pushed by PNHP (Physicians for a
National Health Plan, of which two of the authors were founders) was
already enough to make me worry about it.  The choice of years and
methodology was another.  The highlighting of their most eye-popping
claims with few caveats is a third. 

Yes, they disagree with “my
side” (though I was against BAPCPA, and assume there are a significant
number of medical bankruptcies).  But I don’t think you’ll find me
citing many papers like this from my own side–and if you do, I’m wrong,
and you should call me on it.  I just don’t trust this kind of work.

Paul Ryan has been taking a lot of bashing from the liberal blogs because his budget plan uses a chainsaw rather than a scalpel, and is unlikely to pass.  Given that the Republicans have suddenly become the latter-day saviors of Medicare, it’s even less likely, as Bruce Bartlett points out.  That’s why Bruce favors a VAT; I too have been known to tell a Republican or two that they might want to start looking for campaign planks beyond tax cuts.

But I’m not sure how much more realistic a VAT is, and not just because
the Republicans are against it.  It occurs to me that over the last
twenty years, the parties have adopted each others’ rhetoric so
completely that now almost all viable solutions are off the table.  By
which I mean that Democrats want to be the party of tax cuts . . . as
long as you make under $250,000 a year.  And Republicans want to be the
party of big spending . . . as long as you’re elderly, or have a farm.

The
problem is, neither party is willing to go where the money is.  You
cannot fund our budget deficit with tax increases on the rich.  The
people who make over $250,000 control a large share of national income. 
But not that large.  Your ability to tax tops out somewhere–and not at
90%.  Eventually, avoidance, evasion, and changed work habits start
rapidly eroding your gains.

Nor can you fund it with unspecified
cuts in spending, not even pork.  Pork should be cut because it’s a
waste–but it’s a drop in the bucket compared to social security,
medicare, defense, veterans affairs, and other things that Republicans
don’t really want to mess with.

Ryan’s budget is honest.  But
it’s not workable.  But the Democrats aren’t showing courage
either–mostly, their savings are of the “Sometime in the future we’ll
get around to this” variety.  Obama’s much-heralded decision to use
current policy as a baseline, rather than current law, turns out to be
less an exercise in political bravery, than a way to avoid grappling
with the political cost of spending more money–and particularly, to
avoid having to find a way to pay for it. 

All this implies
something really scary about our ability to get our fiscal house in
order.

Matthew Yglesias twitters “Do rightwingers really believe that US health insurance has no mortality-curbing impact?”  Austin Frakt suggests that I am somehow in the grip of this ridiculous belief, and goes onto say that the state of knowledge is beyond the point where we need to understand the size of the effect.

I question the description of myself and Tyler Cowen as “rightwingers”–conservatives hate a good third of my positions at least.

But to answer the
question anyway, I thought I’d made it clear, but apparently not:  I
think it is possible that the lack of insurance has no effect on
aggregate mortality statistics.  I do not think that this is likely, but
I think it’s possible.  What I think is likely is that the effect is
not that large, because if it were large, it would be very surprising to
see so little effect on the mortality of an elderly population with a
high mortality rate, or to have a study that samples 600,000 people and
finds no effect.

Mostly what I think is that the statistics are
really, really flawed.  Not because the authors are bad social
scientists, but because this stuff is so hard to tease out.  Natural
experiments are rare, and data sets often hard to come by.

This
is about how I feel about the minimum wage.  My intuition is that demand
curves slope downward, so if you raise the price of labor, employers
are likely to consume less of it.  But if you can get a study like Card
and Krueger, than the effect simply can’t be that large–at least,
within the range that the US usually plays with the minimum wage.  I
don’t think it’s particularly good public policy, because too much of it
goes to middle class teenagers and the like, and even small
disemployment effects are dangerous for vulnerable populations.  But I
don’t think it’s super-terrible public policy either.

I’m much
more convinced by the benefits of health insurance for certain
subpopulations, particularly people with diseases we’re very good at
treating.  HIV seems to pretty convincingly respond to offering public
treatment–which also has a pretty compelling public health rationale.
(I don’t want to hear anything about spears
mounted on steering wheels, thank you very much).  Medicaid
expansions provide some pretty good natural experiments, IMHO,
indicating that you can improve infant mortality.  Poor people with
hypertension get better blood pressure control pretty consistently.

But
this doesn’t imply a large effect in the macro data if we extended
health coverage, precisely because not that many people under the age of
65 die of things we can treat.  That whole age group is only about a
quarter of deaths, and some of them are from things like metastatic
cancer or auto deaths, in which more health care coverage can at best
eke out moderate further improvements.  (That may not be true in the
future.  It is now, sadly.)

Obviously, this matters.  If 45,000
people die a year, this makes a more urgent case for overlooking the
drawbacks of single payer than if 1,000 people die a year–there are
probably more cost-effective ways to control those deaths.

But
that is far from the whole calculation.  The mortality question is
really important, but it doesn’t touch non-mortality outcomes, which are
even harder to measure comprehensively.  It doesn’t touch on the
financial questions raised by medical bankruptcies–I think they’re
overstated by the Himmelstein/Woolhandler crowd, but that doesn’t mean I
think they don’t exist.  It doesn’t address the social justice
questions.  It just says, this is probably not the best grounds upon
which to make the case for national health care, because we don’t have a
good handle on the number.

What it might do is point us towards
the shape of expansions.  To the extent that the data make a strong
case, it might point to more modest interventions:  prenatal and infant
care.  Tuberculosis and HIV.  Certain kinds of chronic conditions
(hypertension is really relatively cheap to treat, and very important,
although as with diabetes compliance is apparently a giant problem even
when there aren’t cost barriers).   I’d probably support most of these.

But
the core question for me is not whether there’s any effect–I’m willing
to consider the possibility there isn’t, but I tend to assume there
is.  The question is, how big? Because if it exists, but it’s too small
to measure, it might not be the issue our government should be most
focused on.  Particularly when you consider that there are costs, as
well as benefits, to a national health care system.

You can expect that I’ll be blogging quite a bit about this topic over the next few days.  A reader in Tyler Cowen’s comments offers this 2009 study:

Health insurance characteristics shift at age 65 as most people become eligi-
ble for Medicare. We measure the impacts of these changes on patients who are
admitted to hospitals through emergency departments for conditions with similar
admission rates on weekdays and weekends. The age profiles of admissions and
comorbidities for these patients are smooth at age 65, suggesting that the severity of illness is similar on either side of the Medicare threshold. In contrast, the
number of procedures performed in hospitals and total list charges exhibit small
but statistically significant discontinuities, implying that patients over 65 receive
more services. We estimate a nearly 1-percentage-point drop in 7-day mortality
for patients at age 65, equivalent to a 20% reduction in deaths for this severely ill
patient group. The mortality gap persists for at least 9 months after admission

I referred to three earlier studies, including one by Card, as
surveyed by Levy and Meltzer:

Card et al. use a
regression discontinuity approach to estimate the impact of Medicare
coverage on mortality.  The basic idea is that if health insurance
significantly affects mortality in the short run, the dramatic increase
in health insurance coverage at age 65 as a result of Medicare should
translate into a reduction in mortality at age 65 relative to the
overall trend by age.  In fact, the data show no such discontinuity: 
mortality changes smoothly with age.  Card et al. do find discrete,
significant increases in consumption of medical care.  They also noted
some improvements in self-reported health at age 65, although many of
these effects are imprecisely estimated.  One important exception is the
result for Hispanics and low-income minorities, both of whome see
significant increases in the probability of reporting good or better
health at age 65.

Polsky et al. take a different approach to
estimating the impact of Medicare on health.  They analyze changes in
the trajectory of self-reported health at age 65 adn find that receiving
Medicare increases the probability that respondents report excellent or
very good health.  One surprising aspect of these findings is that
these shifts are observed both for respondents who were uninsured prior
to Medicare and for those who were otherwise insured.  This result is
surprising because one would have expected benefits to be concentrated
in those who were not previously insured.  The observed improvements are
also surprising because Medicare often provides less comprehensive
coverage than do most private insurance plans.  Polsky et al.
hypothesize that the effect may be due to the stability of Medicare
coverage compared with private coverage.

Finkelstein &
McKnight use data from the 1960s to see whether geographic areas with
lower insurance coverage rates prior to the enactment of MEdicare
experienced improvements in mortality following the enactment of
Medicare relative to areas with higher pre-1965 coverage rates.  Earlier
work by Finkelstein using this same strategy documents significant
increases on hospital spending and utilization, but the work of
Finkelstein & McKnight finds no corresponding improvement in
mortality.  The authors conclude that in its first 10 years, the
establishment of universal health insurance for the elderly had no
discernable impact on their mortality.”  Of course, this result applies
to Medicare circa 1970; advances in medical technology and in the scope
of Medicare benefits since then may have greatly increased the marginal
health benefits of Medicare coverage.

Taken together, these three
studies of Medicare paint a surprisingly consistent picture:  Medicare
increases consumption of medical care and may modestly improve self
reported health, but has no effect on mortality, at least in the short
run.  Whether there are long-term effects remains an open question; this
uncertainty reflects the limited generalizeability of the natural
experiment results.

The science is always evolving. 
Obviously, if we get a lot of results showing that there is a big
effect at 65, I’ll change my mind; but right now, the bulk of the
evidence runs the other way.  It’s worth noting that the later Card
paper itself notes that the aggregate figures show no mortality
improvement:

As is true for health insurance more
generally (see Levy and
Meltzer [2004]), it has proven more difficult to identify the health
impacts of Medicare.9 Most existing studies have focused on mor-
tality as an indicator of health.10 An early study by Lichtenberg
(2001) used Social Security Administration (SSA) life table data
to test for a trend-break in the age profile of mortality at age
65. Although Lichtenberg identified a break, subsequent analysis
by Dow (2004) showed that this is an artifact of the interval-
smoothing procedure used to construct the SSA life tables. Com-
parisons based on unsmoothed data show no evidence of a shift at
age 65 (Card, Dobkin, and Maestas 2004). Finkelstein and McK-
night (2005) explore trends in state-specific mortality rates for
people over 65 relative to those under 65, testing for a break
around 1966–the year Medicare was introduced. They also ex-
amine the correlation between changes in relative mortality after
1966 and the fraction of elderly people in a region who were unin-
sured in 1963. Neither exercise suggests that the introduction of
Medicare reduced the relative mortality of people over 65, though
it should be noted that the power of these analyses is limited.

How
could mortality improve at the micro level, and not at the macro
level?  Increasing utilization of health services is not all mortality improving.  As I note in the column, health care can kill as well as
heal–one estimates puts the death from nosocomial (treatment-induced)
infections at 80,000 a year. So while it’s entirely possible–indeed
certain–that some number of people are saved by having insurance, it’s
also very likely that some number of people are saved by not having it,
or having less generous insurance, because they don’t go in for a
treatment that would have killed them.

The 2009 paper was
looking at a small subset of conditions that are urgent, and which we’re
relatively adept at treating.  But it may be washed out by the people
who die having knee surgery.

This is, of course, why comparative
effectiveness research is very popular among wonks.  But it’s trickier
than it sounds, because patients are very heterogenous.  I actually
expect this problem to go down in the next twenty years or so, as better
genomics gives us more of a handle on which treatments work for whom.

One
thing it does suggest is that if we want to maximize the benefits from
expanding insurance coverage, we really need to wage a scorched-earth
battle against nosocomial infection.  Hospital hygeine has slipped
massively from where it was in the thirties, because antibiotics have
made health care workers lless urgent about it.  We need to return to
the OCD days of yore.

Here’s an angle on the Greek financial crisis I hadn’t considered: Victor Matheson, The a member of the Sports Economist group blog, argues that one reason the Greeks wound up in such deep financial trouble is that they went deep in hock to pay for the Olympics:

Greece’s federal government had
historically been
a profligate spender, but in order to join the euro currency zone, the
government was forced to adopt austerity measures that reduced deficits
from just over 9% of GDP in 1994 to just 3.1% of GDP in 1999, the year
before Greece joined the euro.

But the Olympics broke the bank.
Government deficits rose every year after 1999, peaking at 7.5% of GDP
in 2004, the year of the Olympics, thanks in large part to the 9
billion euro price tag for the Games. For a relatively small country
like Greece, the cost of hosting the Games equaled roughly 5% of the
annual GDP of the country.

Of course, the Olympics didn’t
usher in an economic boom. Indeed, in 2005 Greece suffered an
Olympic-sized hangover with GDP growth falling to its lowest level in a
decade.

That would certainly follow the pattern of crazy
civic development projects in which stadiums and museums are supposed to
somehow substitute for everything that is missing in the local
economy.  But the governments in question don’t usually end up in receivership.

Fun
Olympic factoid of the day:  the television news yesterday reported
that the Whistler ski complex had essentially been developed in the
hopes of the area someday scoring a winter Olympics.  I have no idea if
this is true, but it seems both plausible and deeply troubling. 

It’s a contentious question, but curiously, one that doesn’t get debated nearly as fiercely as things like “how many uninsured people are there?”  I find that surprising, because after all, we don’t necessarily care whether people are marked by some survey as “insured” or “uninsured”; we care whether there is preventable suffering in the world.

But it turns out to be really hard to determine how many people die without insurance, which is the subject of this month’s column. 
The most recent available study, which also had the largest sample and
controlled for the most variables, found no effect at all–a result
which surprised the hell out of its author, a former Clinton advisor. 
Other studies say the number is in the tens of thousands. 

The
left is predictably fond of the study which got the largest number,
45,000 a year.  Unfortunately, its authors are political advocates for
a single-payer system, who also helped author the notorious studies on
medical bankruptcies.  Those studies are very shoddily done, with
parameters that somehow always conspire to produce the maximum possible
number.  In the first study, they set an absurdly low threshhold for
what constituted a “medical bankruptcy”.  In the second, they chose
2006, the year after the 2005 bankruptcy reform act had driven an
unprecedented spike in filings.  It seems pretty likely that medical
bankruptcies were bound to be overrepresented in 2006, since most
financial events are easier to see coming than illnesses.  But even if
you disagree–and the authors offered an incredibly wan explanation of
why they did–it’s very clear that the people who filed in 2006 were
not going to be a representative sample of bankruptcies in a normal
year.  I can’t imagine why you would choose to study 2006 unless you
were looking for biased results.  I have to conclude that their
political beliefs are affecting their work, which means I wouldn’t
touch that 45,000 number with a bargepole–I wouldn’t cite anything
they authored even if it offered to prove beyond a shadow of a doubt
that I was right about everything.

The right, meanwhile, shuns
the subject like the plague.  It will not do anyone’s career any good
to be attached to an argument that sounds like the health care
equivalent of “let them eat cake”.

So allow me, maybe, to be the
first. I’m afraid I’m not confident about any number.  All of these
studies suffer from unobserved variable bias, which is to say, the
uninsured are not like the rest of us.  (The long term uninsured, I
mean; the short term uninsured are not a large problem for society). 
There are all sorts of reasons that people end up uninsured, but most
of them are correlated with much poorer health outcomes, and only some
of them end up recorded in our surveys.

To give you an example
of what I mean, one of the two studies that went into the most commonly
cited number–the roughly 20,000 a year figure from the Institute of
Medicine and the Urban Institute–found that the highest mortality was
not associated with being uninsured, but being on a government health
care program. (the other excluded those patients). This was true even
after they’d run all their controls.  Given that the bulk of the
coverage expansion in both the Senate and the House plans comes from
Medicaid expansion, this is a little disturbing.

But how likely is it that Medicaid is killing people?  Possible, I suppose, but not really all that likely. 
Medicaid and Medicare patients, too, are not like the broader
population.  The authors in fact recognized this fact in their paper,
pointing out that these patients have higher rates of disability–but
then failed to address the obvious question this raised about their
data on the uninsured.

This problem plagues almost all of the
studies on mortality and the uninsured.  Probably the best one looked
at patients who had been taken to the ER, which still showed higher
mortality for the uninsured.  But it’s not clear that this indicates
that lacking insurance is dangerous; it may be telling us that people
who lack insurance have a lot of factors that lead to poorer health
outcomes.

To my mind probably the single most solid piece of evidence is this: 
turning 65–i.e., going on Medicare–doesn’t reduce your risk of
dying.  If lack of insurance leads to death, then that should show up
as a discontinuity in the mortality rate around the age of 65.  It
doesn’t.  There are some caveats–if the effects are sufficiently long
term, then it’s hard to measure, because of course as elderly people
age, their mortality rate starts rising dramatically.  But still, there
should be some kink in the curve, and in the best data we have, it just
isn’t there.

That doesn’t mean I’m prepared to say
that no one dies from lack of insurance.  The data is messy, and the
studies often contradict each other.  Intuitively, I feel as if there
should be some effect.  But if the results are this messy, I would
guess that the effect is not very big.  At minimum, I think we should
be pretty cautious about stating that we know how many people die from
lack of insurance.  We don’t, and worse, we may never.

A Detroiter in New York reports that Zipcar–which currently stocks so few American cars that he frequently has to go across town to find a Ford–is suddenly asking customers how they feel about car brands.  And specifically, about Toyota (forgive the image, which is slightly cranky):

4)

Considering Zipcar’s demographic, this cannot be good news for Toyota.  But it might be great news for Ford.