Insurance Coverage Numbers Are Important, But Not All-Important

Whether you’re into this sort of thing or not, you’ve probably been hearing a lot about healthcare policy these days. Public debate has roiled as Republican lawmakers attempt to make good on their seven-year promise to repeal and replace the Affordable Care Act (ACA). As the debate rages on, one metric in particular appears to hold outsize importance for the American people: the number of Americans covered by health insurance.

Analysis by the Congressional Budget Office, which showed that 14 million more Americans could lose coverage by 2018 under the Republican replacement, caused intense public outcry and was frequently cited as a rationale for not abandoning the ACA. There is immense political pressure not to take actions that will lead to a large loss of coverage.

But here’s the thing: the relevant metric by which to judge Obamacare isn’t insurance coverage numbers. To do so is to move the goal posts and place undue importance on a number that might not be as significant as we imagine.

The ultimate point of health insurance, and the implied rationale for manipulating insurance markets to cover sicker people, is that people will use insurance as a means by which to improve their health, not just carry a plastic card in their wallets.

Health Insurance ≠ Health

The impulse to use insurance coverage as a proxy for health is misguided but understandable. For one thing, it’s a simple, single number that has dropped precipitously since the implementation of the ACA; that makes it a great marketing piece for supporters. For another, health insurance is the mechanism by which most of us pay for most of our healthcare.

And yet in 2015 the uninsured rate fell to 10.5% (down from 16.4% in 2005) while age-adjusted mortality increased for the first time in a decade.

It turns out a nominal increase in the amount of insured Americans doesn’t necessarily translate into improved health outcomes for those individuals. A newly released paper from the National Bureau of Economic Research (NBER) finds that while the ACA has improved access to healthcare, “no statistically significant effects on risky behaviors or self-assessed health” can be detected among the population (beyond a slight uptick in self-reported health in patients over 65).

These results are consistent with other studies, like the Oregon Medicaid Experiment, which found no improvement in patients’ blood pressure, cholesterol, or cardiovascular risk after enrolling them in medicaid, even though they were far more likely to see a doctor. There were, however, some notable-but-mild psychic benefits, such as a reduction in depression and stress in enrollees.

In short, despite gains in coverage, we haven’t much improved the physical health of the average American, which is ostensibly the objective of the ACA.

Why Not?

To be fair, the ACA is relatively young; most of its provisions didn’t go into effect until 2014. It may well be that more time needs to pass before we start to see a positive effect on people’s health. But there are a few reasons to think those health benefits may never materialize–at least, not to a great extent.

A lot of what plagues modern Americans (especially the poorest Americans) has more to do with behavior and environment than access to a doctor. Health insurance can be a lifesaver if you need help paying for antiretroviral medication, but it won’t stop you from living in a neighborhood with a high rate of violent crime. It won’t make you exercise, or change your diet, or stop you from smoking. It won’t force you to take your medicine or stop you from abusing opioids, and it certainly won’t change how you commute to work (that’s a reference to the rapid increase in traffic deaths in 2015).

Here’s something to consider: A lot of the variables that correlate to health–like income and education–also correlate to the likelihood of having health insurance. If we want healthier Americans, there may be more efficient ways to achieve that than expanding insurance coverage, like improving employment and educational opportunities. Maybe something creative, like Oklahoma City’s quest to become more walker-friendly, could yield better results?

Of course, all things being equal, more insurance coverage is better. But nothing comes without cost, and as a society we want to be sure that benefits justify costs. So far, that’s not clear. This poses an existential question about our current pursuit of universal coverage, and, by extension, the relevance of coverage as a metric for the success of healthcare policy: If insurance isn’t the cure, why are we prescribing it with such zeal?

The CBO Feels the Love

The Congressional Budget Office isn’t known for its awesome marketing or pithy statements. It’s never been recognized by Buzz Feed for its social media use. Nevertheless, the Congressional Budget Office (CBO) is enjoying an unusual amount of love on Twitter.

Here’s how you really know they’ve made it: The title of yesterday’s National Review Morning Jolt was, “The Congressional Box Office is Very ‘In’ Right Now.”

Two nights ago, it tweeted a four-word message with a link to its analysis of the American Health Care Act (AHCA) that has received far more attention than is normal for the CBO twitter account. As of writing this post, the tweet in question has racked up 62 responses, 846 retweets, and 542 likes.

That might not sound like a lot; the truth is, it isn’t. Donal Trump’s tweets, for example, often receive tens of thousands of ‘likes.’ But relative to the usual engagement on the CBO’s tweets, it’s absolutely ridiculous.

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Since January first of 2016, the CBO has tweeted 120 times. The median numbers of responses, retweets, and ‘likes’ to those tweets were respectively 0, 3, and 2. In fact, this latest tweet is responsible for nearly half of all the reactions garnered by the CBO’s account over that time period.

So what does this tell us?

The most obvious insight is that people are paying more attention to the CBO since the administration change. That’s not surprising; the CBO evaluates economic and budget proposals, and there are quite a few shakeups going on in that department right about now. The agency has been firing on all cylinders to keep up with demands from Congress, doubling the frequency of its tweets since Trump took office (.48 tweets/day compared with .24 tweets/day during the previous year).

In the final year of Barack Obama’s presidency, the CBO only averaged 9.5 ‘retweets’ per tweet–and that’s including a January 17th tweet that was responsible for 405 retweets alone (if you exclude that post, the account averaged 5 retweets per post). Since the beginning of the Trump administration, that average has jumped to 39.6 (7.6 if you don’t include the latest viral tweet).

Another insight: Negative feelings about the AHCA are driving the CBO’s recent popularity surge. The only two tweets with significant activity in the past year (look at the spikes in the graphs above) were about the AHCA and the effects of repealing the Affordable Care Act (ACA). A cursory glance through the responses to both tweets reveals that most of the commenters are detractors of the current administration who oppose changes to the ACA.

It would be a mistake to use this as a proxy for national consensus on the AHCA, however. Twitter often skews liberal.

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For the record, the CBO writes a killer blog (I use the term loosely, for obvious reasons). It’s a great source of unfiltered information about economic ideas from Washington. You can sign up to receive email updates from it here. And, if the CBO is reading this, don’t forget about us when you get famous.

Does Portland’s CEO Tax Indicate Progressive Shift to Local Focus?

Starting next year, publicly traded companies operating in Portland, OR will be subject to a new tax surcharge if their CEOs are compensated at a rate exceeding 100 times that of their median employee. Per a Dodd-Frank regulation approved in 2015, public companies must disclose details of CEO and worker compensation beginning in 2017.

Such companies will have to pay an additional 10% to the existing business income tax owed to the city, calculated as 2.2% of their net income less operating losses. Companies whose CEOs earn over 250 times more than their median employee will have to pay a 25% surcharge.

Officials from the city estimate the new tax will apply to about 550 companies and provide between $2.5 million and $3.5 million in new revenue to the city’s general fund, which funds basic public services.

The new measure is the first of its kind; proponents are describing it as an innovative step in countering growing income inequality–one that they hope other cities will adopt. Skeptics of the new tax, most notably the Portland Business Alliance, say  it won’t reduce income inequality and that the city government should instead try to work with local businesses to boost job growth.

Both parties have good points. In isolation, the surcharge isn’t likely to do much in the way of reducing inequality. For starters, under the new SEC law corporations are given wide latitude to calculate median worker earnings (it’s more difficult than it sounds when you have workers in multiple countries with varying types of employment). More practically, large corporations with highly compensated executives do relatively little of their business in Portland. The city, to its credit, seems to understand this and isn’t eager to overplay its hand, hence the relatively small amount of revenue being raised by the tax.

But if enough cities adopted laws penalizing high CEO-worker compensation ratios, it could conceivably make a big enough dent in corporate profits to spur a change (though this might look substantially different from what lawmakers envision).

That seems to be exactly what Portland’s government hopes to catalyze. “It falls to cities to do creative, progressive policymaking,” Mayor Charlie Hales said, “and this is exactly what this is.” The real story here might not be a change to Portland’s tax code, but instead a change to the arenas in which progressive politicians choose to fight for their policies.

Faced with a Republican-dominated federal (and in some cases, state) government, large cities, which overwhelmingly tend to elect Democratic leadership, could increasingly take it upon themselves to implement the changes that elude them on the national level.

In cases where progressives advocate for the expansion of existing laws, they could find it easier to achieve such policy at the local level. This is for two reasons: First, the politics and economics are more likely to align; second, doing so is largely consistent with our system of federalism that allows for local expansion of federal law.

Consider that many large cities have seen fit to implement minimum wages that exceed the levels set by the states in which they reside, which often themselves exceed the $7.25/hour wage set by the federal government.

Focusing on advancing progressive policy at the city level should, in theory, mollify conservative opposition that has long stressed the importance of local governance. However this doesn’t necessarily appear to be the case: two days after Birmingham raised its minimum wage to $10.10/hour, the state of Alabama passed a law retroactively denying cities and towns within the state the ability to set their own minimum wages. The law is being contested in court.

The Lost Art of Debate

This recent election cycle has been nothing if not revelatory. Who would have guessed that Bernie Sanders and Donald Trump were the harbingers of a populist revolt that would leave both major parties in the throes of identity crisis?

But enough punditry; those are considerations for the political class. While they meet behind closed doors in Washington, We the People should revisit the ancient and sacred art of civil debate and contemplate why so many of us abandoned it.

This isn’t to say that people haven’t fought for what they believe in. Indeed, part of the problem is that many of us confuse fighting with debate. Debate requires patience, empathy, clarity, and above all, an open mind. Fighting requires very little beyond the hubris to mistake conviction for virtue (for examples, visit Facebook, YouTube, or twitter).

To debate someone you have to respect them enough to let them finish a sentence. You have to be willing to let them construct an argument against you under the assumption that you will later be able to successfully challenge its premise. You must also open yourself to the idea that there are realistic limits to your own knowledge and perception.

The bravest thing you can do is give someone time to speak against you. Conversely, resorting to ad hominem, laying waste to innumerable straw men, and shutting out dissent are the strategies of cowards: the easy way out.

Too often these days we lack the bravery to face our ideological opponents. We go online and read news sources that confirm our opinions; we shame our detractors into silence; we withdraw to be with our own kind. Consider that this year over 1,700 counties voted with margins 20 points different than the national vote while only around 250 voted within 5 points of the national vote. At the Washington Post, Phillip Bump writes that two thirds of Clinton and Trump supporters had few to no friends supporting the other candidate. The lukewarm comfort of our echo chambers keeps us content to ignore that ours is a big world.

Nowhere has this tendency become as evident as on college campuses, which have sadly become ideologically homogeneous to the point of enfeeblement. Recently, colleges have developed a disturbing trend of turning away controversial speakers at the request of students. Between 2015 and 2016, the Foundation for Individual Rights in Education counts 52 attempts to disinvite speakers based on student opposition, of which 24 were successful.

Following the election of Donald Trump, there was a widespread and embarrassing exhibition of incredulity. The dangers and consequences of the echo chamber were made apparent.

Rather than take this as an opportunity for introspection, some have chosen to double down. More than a few colleges granted accommodations to their students, ranging from postponing exams to providing “breathing spaces”—rooms containing pets and coloring books—to students who felt stressed by the results. Many smart people took to social media to excoriate others they’d never met, or tried to understand. Is it any wonder that those who have shied from ideological opposition wither in its face?

A closed mind cannot aspire to persuasion. A theory is not made stronger without facing resistance. If you want people to listen to you, as presumably we all do, you should be willing to hear them out. That means reading news from sources that make you uncomfortable and trying to engage people who aren’t like you without writing them off as bigots. It means reaffirming the value of unpopular speech, denouncing censorship, and moving past identity politics. It won’t be easy, but it will be worth it.

For the good of our society, it’s time to revive the art of debate and put aside the intellectual lethargy that precludes it.

No, Voting Third Party Isn’t a Waste

Given the historically unpopular candidates presented to us, 2016 should be the year Americans are encouraged to expand our political horizons.

Instead, people interested in a non-binary choice this election face a litany of derisions and insistences that their political preferences should take a back seat to a greater mission of ensuring that either Clinton or Trump not take the White House.

Underneath it all is the accusation—outright or implied—that voting for a third party candidate is a waste of time: a selfish, brazen gesture best left for a less pivotal year.

This is a terrible argument. There’s no such thing as wasting your vote if you’re doing what you want with it: it’s yours! Vote for candidate A, B, or C; don’t vote; write in your uncle’s name. It doesn’t matter. The only real way to waste your vote is to let someone else tell you how to use it.

Once you’ve been dutifully informed by some clairvoyant pundit that you’re wasting your vote by using it the way you want to, the dismissal of third party candidates based on their remote chances of victory is never far behind. This is profoundly confused; a vote isn’t a bet. There’s no prize for picking the candidate that ends up winning.

The point of a representative democracy–other than to elect leaders–is to convey national preferences to politicians (does anyone believe Ralph Nader’s relative success as a Green Party candidate had no impact on the Democrats’ current environmental stances?). The best way to do this is for everyone to vote for candidates and ideas that appeal to them. The worst thing voters can do is reward unresponsive parties with loyalty: that only begets more unresponsiveness.

Increased interest in third parties let’s Democrats and Republicans know they’re off track. In that sense, and especially to anyone interested in the integrity and evolution of our political discourse, third parties have an important role as the barometers of American political attitudes, if not yet heavyweight contenders for the presidency.

Remember: only a very small minority of our country has actually voted for Clinton or Trump at this point! There’s no reason for the rest of us, who have actively or passively declared our disinterest in both, to feel pressured to line up behind either of them. Some will, and that’s fine if it’s what they want at the end of the day; in fact, I’m happy they’ve found something they can believe in. But it’s not unreasonable for the rest of us to pursue options that we find more personally appealing.

Pluralism and diversity are, at least ostensibly, integral to the American political experience. I can think of nothing worse for our nation than a fear-driven dichotomy whereby we are encouraged to re-imagine second worst as synonymous with best. If we want to be happy with the results of our electoral process, we should start by being more honest about what we want from politicians. The best way to do that is in the voting booth.

“Free” College Would be a Terrible Idea

The free college crusade represents a perfect collision of ignorance and entitlement. The movement is popular with self-interested students seeking debt forgiveness or a free ride and contributes heavily to the appeal of Bernie Sanders’ candidacy among them. While he is the most extreme in his rhetoric and supposed intentions, the venerable senator is only one among many high-profile Democrats to opine that higher education should be at least partially subsidized by federal money (or more accurately that federal subsidies should be expanded, since they already exist).

Their argument is predicated on the idea that there is a moral or economic obligation to protect students from the rising costs of college education. The underlying assumption is that the federal government is actually capable of containing such inflation by throwing money at it. However you dice it—morally or financially—it’s a bunk policy move that, if implemented, would certainly do more harm than good.

There is no free lunch…or sociology class

Let’s start off with the obvious; professors, administrators, and other faculty aren’t going to work for free. Nor can universities maintain, power, and supply themselves free of charge. It will still cost a lot to keep a college operating, so free college is a misnomer. It will still be paid for, but we would change the payer.

A basic tenet of economics is that costs should be borne by the consumer. There’s good reason for this. When consumers have skin in the game, they ration much more effectively because they’re confronted with the opportunity costs of their decisions (any money or time spent on education can’t be spent on something else) as well as the reality of paying that money back some day.

By contrast, having prospective students make unobligated investments with other people’s money would almost guarantee that more bad investments are made. That means too many people earning degrees in areas that aren’t in high demand and are unlikely to pay for themselves. It’s not that I don’t want anyone to major in art history or theology, but if you’re going to you should pay for it yourself.

Funneling more money into education will inflate costs further

Think about it: if a stranger gave $10,000 to a pizza place so that other people could eat for free, customers would probably order more than the efficient amount of pizza. Why not? There’s no risk involved, at least not to the guy taking the pizzas home.

Let’s say this generous stranger kept funding the restaurant so consumers could continue to enjoy “free” pizza. What might we expect to happen to the cost of pizza? You might be tempted to think that it will stay the same, but the truth is that it would probably rise as overhead and total cost increase. Of course, customers wouldn’t feel the burden of rising prices, and would keep eating away happily.

Meanwhile, behind the scenes the shop has had to hire more cooks and cleaning staff; order more ingredients; use more electricity etc. because they have to produce ever more pizza. Where does that money come from, if not the customers? It comes from the generous stranger, our allegorical taxpayer, who is analogous in all but one crucial aspect: her funding is given by choice and can be halted when the cost becomes prohibitive.

In real life, taxpayers would be on the hook for an increasing amount as constraints on demand are removed and overhead costs increase. A cheaper and more effective method of reducing the cost of college might be easing the accreditation process. Costs might (and probably will) also be driven down by innovations such as online learning and other challenges to the traditional college process.

Free college wouldn’t help the right people

A tuition subsidy would directly benefit the education industry and students who have, are, or will go to college. None of these groups is so destitute as to warrant burdening taxpayers, 68% of which don’t hold a diploma, with the cost of their voluntary, secondary education. On the contrary, 81% of college graduates in 2012 came from families with above-average incomes while merely 7% came from families in the bottom quintile.

Free tuition would fall in with subsidies for electric cars and solar panels: well-meaning policies that essentially transfer wealth up the income ladder to those who are much more likely to take advantage of such incentives. This makes it a very bizarre choice for a candidate, and indeed an entire party, that spends so much time perseverating on the onerous effects of economic inequality.

A major point of college is to accrue human capital: to improve your skills and come out more valuable and employable than you were when you went in. Secondary education is an investment: the benefits of which are enjoyed by the recipient in the form of higher future earnings. Making the taxpayer foot the bill for wealthy kids to invest in their futures is pretty cynical, even by modern standards.

How can you decry tax cuts on the rich and then turn around and hand them a blank check for college? More importantly, how can any of us get behind this? Campuses all over America are full of kids condemning social and economic privilege. And yet they want to vote themselves, the most fortunate echelon of the richest generation ever, out of debt with other people’s money. Let the petulance of that sink in.

What it boils down to is a notable dearth of understanding of basic economics among our generation. Even very smart people that I know are simply unable to reckon with the most fundamental principles of supply and demand and basic price theory.

A better way to help

Even if fully subsidized tuition did make it more likely that low-income people attended college, that wouldn’t necessarily be a good thing and certainly wouldn’t be the best way to improve their lot. It’s pretty unlikely that someone from a poor community who has been forced to attend an underfunded school in their neighborhood is going to be adequately prepared for a college curriculum.

We see this play out again and again. We saw it with affirmative action and we see it in community colleges, where a measly 20% of students seeking a degree receive one within 3 years. It seems a large part of succeeding in college is being prepared to attend it—who could have guessed?

The most frustrating thing about this is that there is a very clear method by which we might compensate for this–it’s just wretchedly unpopular with Democrats[1]…and teachers unions.

What if instead of waiting for someone to turn 18 and encouraging them to enter a college they’re not ready for, we allowed them the ability to choose better schools as children? Instead of sequestering children from poor areas in underfunded and overcrowded schools, we should help parents send their young kids to better schools.

Make no mistake; school choice isn’t a magic bullet or a catch-all solution to educational inequality. But it would greatly improve on some of our current policies, in my opinion.

Tying kids down to public schools (44% of whose funding is procured locally) in their district is a recipe for disaster. Financing public schools through property taxes might work well in affluent communities, but it perpetuates a lack of access to education in poorer areas. Allowing people to choose where to send their kids and giving poor families vouchers for primary education would make a lot more sense than shelling out money to send unprepared students to universities. The only trouble is getting the politics to align.

If the Democratic Party really cared about improving access to education, increasing social mobility for the poor, or cultivating a competent workforce, they would give parents more choice in the schooling of their children. They might also acknowledge that there are other paths to success that don’t involve credentialism and a rigid bureaucratic structure.

Instead, they propose a plan that would pump $70 billion of public money annually into dubious investments and subsidies for the wealthy. It might not make any economic sense, but it’s great for courting votes.

 

[1] To her credit, Hillary Clinton isn’t totally against school choice. She would be fine with allowing for choice among public schools, but not private. Oddly, she cited a fear of parochial schools training terrorists to support her decision. She also thought that a voucher system would be unconstitutional. Sanders stated that he was “strongly against” any program that might redirect funding from public to private schools, including doing so in the form of tax credits.