Uwe E. Reinhardt is an economics professor at Princeton. He has some financial interests in the health care field.
The stern grilling administered recently by members of Congress to Mary Barra,
the chief executive of General Motors took me back to March 2009, when I had the privilege of testifying at a hearing before the House Energy and Commerce Subcommittee on Health.
Perspectives from expert contributors.
At that hearing, Representative Phil Gingrey, M.D. and Republican of Georgia, took me behind the woodshed over a remark I had made
in a post on this blog. I had called the idea that human life is priceless both romantic and silly.
Representative Gingrey asked me:
Dr. Reinhardt, do you believe that we, as individuals, in America should have the ability to value our own lives, or is this something we should ask the government to do for us, i.e., ration that care when
you get to be 90 years old and you need a hip replacement, do you just let them fall and break the hip and die of pneumonia? Or do they get the opportunity, if they value that, to get that hip replaced?
I responded that the issue is not the monetary value we put on our own lives with our own money, but rather that those who preside over private and public health insurance funds, Congress included, at some point
have to ask themselves at what price they can afford to buy additional life years for people insured with those collectively financed funds, which are, after all, finite.
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Uwe E. Reinhardt is an economics professor at Princeton. He has some financial interests in the health care field.
A recent article on Kaiser Health News
reported on a new drug for the treatment of hepatitis C for which the manufacturer charges $1,000 a pill, or $84,000 for a 12-week course of treatment. Chronic hepatitis C is a leading cause of serious liver
disease, including cancer.
Perspectives from expert contributors.
It has been estimated that providing the drug to all patients known to have hepatitis C would substantially drive up budgets for public insurance programs and premiums for private insurance, though over the
longer run there
would be offsets to these upfront costs
by obviating the need for alternative treatments, including liver transplants (see Pages 69-71 of the meeting summary from the California Technology Assessment Forum, linked to above).
The high price charged for the drug has led to street protests in San Francisco and calls for congressional hearings. It also provoked from The New York Times a stern editorial, “How Much Should Hepatitis C Treatment Cost?”
These reports brought to mind my post in November
2012. In that, I presented the following heuristic visual.
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Uwe E. Reinhardt is an economics professor at Princeton. He has some financial interests in the health care field.
About half a century ago, organized medicine and the hospital industry in this country struck a deal with Congress that in retrospect seems as audacious as it seems incredible: Congress was asked to surrender
to these industries the keys to the United States Treasury.
Perspectives from expert contributors.
In return, the industries would allow Congress to pass
a 1965 amendment to the
Social Security Act, described as “an act to provide a hospital insurance program for the aged under the Social Security Act with a supplementary health benefits program and an expanded program of medical
assistance, to increase benefits under the Old-Age, Survivors, and Disability Insurance System, to improve the Federal-State public assistance programs, and for other purposes.” We have come to know it
as Medicare.
As Wilbur Cohen, a chief architect of the law and subsequently secretary of health, education and welfare,
later described the deal (Page 25):
The sponsors of Medicare, myself included, had to concede in 1965 that there would be no real controls over hospitals and physicians. I was required to promise before the final vote in the executive session
of the House Ways and Means Committee that the federal agency [to be in charge of administering Medicare] would exercise no control.
Medicare was not to interfere in any way in the physicians’ treatment of Medicare patients – through what we now know in private health insurance as “managed care.” Nor was Medicare allowed to influence the way hospitals were constructed and operated. Finally, the deal called for a completely one-sided payment
system. Read more…
Uwe E. Reinhardt is an economics professor at Princeton.
Paul Oyer’s thoughtful “How to Be a Better Valentine, Through Economics”
is not to be lightly dismissed. He has a Ph.D. in economics from Princeton University.
Perspectives from expert contributors.
That said, I find myself distressed by his West Coast ideal of romance. In his first recommendation, for example, Professor Oyer advises readers to signal their love for their significant other by making a wasteful
investment — including, horror upon horrors, a benefit in kind such as “taking her to a movie she likes and you hate (possibly one starring
Sarah Jessica Parker).”
In a lecture note entitled “On the Economics of Benefits in Kind, or Why Economists are Lousy Lovers” (see Pages 7-8)
I explain the East Coast approach to efficient romance. Read more…
Uwe E. Reinhardt is an economics professor at Princeton. He has some financial interests in the health care field.
Last week a brouhaha erupted over a passage in Appendix C of a Congressional Budget Office report, Budget
and Economic Outlook 2014-24.
Perspectives from expert contributors.
In that appendix, “Labor Market Effects of the Affordable Care Act: Updated Estimates,” the agency reported its estimate that the Affordable Care Act “will reduce the total number of hours
worked, on net, by about 1.5 percent to 2.0 percent during the period from 2017 to 2024, almost entirely because workers will choose to supply less labor – given the new taxes and other incentives they
will face and the financial benefits some will receive.”
The agency estimated this reduction in hours worked as the “full-time-equivalent workers of about 2 million in 2017, rising to about 2.5 million in 2024.” The agency hastens to point out that this
number does not represent jobs no longer offered by employers but, for the most part, the decision of employees not to work.
Opponents of the Affordable Care Act and many news reports quickly seized upon this estimate, characterizing it as “dropping a bomb” or having “nuked” Obamacare.
Joseph Rago of The Wall Street Journal attributed this interpretation of the data to an exposé by my fellow Economix blogger Casey B. Mulligan.
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Uwe E. Reinhardt is an economics professor at Princeton.
It may be sheer coincidence that in this 11th anniversary year of the invasion of Iraq, my fellow blogger Casey Mulligan chose to use the economist’s case for an all-volunteer military as a peg to assert that political factors, rather than the sound reasoning of economists, tend to drive our nation’s public policy, including the decision in the 1970s
to abandon the military draft.
Perspectives from expert contributors.
The economist’s case for the all-volunteer army is straightforward — and also quite interesting from a broader perspective.
In classrooms or textbooks, the case is usually illustrated with the aid of a simple demand-and-supply analysis,
with a hypothetical supply-of-soldiers curve such as the solid, upward-sloping line in the chart below.
A supply curve of anything exhibits the quantity of the thing suppliers are willing to supply to the market per period at different prices being offered for the thing. In the present context, the curve represents
the number of individuals willing to rent out and potentially sacrifice their bodies, so to speak, for military service in the armed forces at different wages being offered them for that service (including
such benefits as health insurance for them and their families).
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Uwe E. Reinhardt is an economics professor at Princeton. He has some financial interests in the health care field.
A common theme among critics of Obamacare has been that it basically is a war on the young and especially on men.
Perspectives from expert contributors.
“Why aren’t Millennials marching in the street over Obamacare?” asks
Chris Conover, a policy analyst
at Duke University,
in Forbes. “Anyone
with a conscience should be offended by the greatest generational theft ever witnessed in the history of the world. Young Americans – especially the Millennial generation born between 1977 and 1995 –
are the biggest losers in this battle, but it will adversely affect their children and grandchildren to boot.”
The most seriously victimized by Obamacare, its critics say, are men. Possibly inspired by John Goodman’s column “Obama’s War on Men” on the National Center for Policy Analysis health care blog, Avik Roy,
a Forbes columnist and Manhattan Institute senior fellow, metaphorically described Obamacare in a Fox News interview as a “war on the bros.”
The destructive weapon supposedly wreaking this havoc on the young and the “bros” is the “adjusted community rating” that the Affordable Care Act imposes on the market for health insurance policies sold to individuals or small groups
(mainly the employees of small businesses). Although the act allows insurers to vary their premiums by age up to a ratio of 3 to 1 and to charge smokers 50 percent more than nonsmokers within an age group
– hence the term “adjusted” community rating — premiums may no longer be based on the health status of individuals within age bands nor on their gender.
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Uwe E. Reinhardt is an economics professor at Princeton. He has some financial interests in the health care field.
In a Dec. 27 lead editorial, “Government Advantage,”
the editorial writers of The Wall Street Journal wrote:
Amid the larger ObamaCare meltdown, seniors are discovering their choices are fewer, costs higher and coverage poorer too. Liberals fear the increasing popularity of Medicare Advantage, and they’re
starting to gut this market alternative to their original health care entitlement before the sand runs out on President Obama’s second term. About 14 million people or 28 percent of Medicare beneficiaries
choose Advantage over the government option, which is why the Affordable Care Act steals about $156 billion from the program – even as enrollment has surged 30 percent since 2010.
Perspectives from expert contributors.
A theft of $156 billion should catch one’s attention, especially if government is the thief. It warrants a closer look.
For starters, what is the time frame of this $156 billion “theft”? Greater clarity on this point would have been helpful, lest readers think that this is an annual figure. In fact, it is the sum
of projected future annual cuts off projected future total payments to Medicare Advantage plans over the decade 2013-2022 (see line 8 of Table 2, page 5 in this Congressional Budget Office projection).
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Uwe E. Reinhardt is an economics professor at Princeton. He has some financial interests in the health care field.
In his speech accepting his party’s nomination as presidential
candidate on Aug. 18, 1988, George H.W. Bush proclaimed that he wanted a “kinder and gentler nation” – kinder and gentler, I suppose, than he thought it was in 1988.
Perspectives from expert contributors.
In those days, my wife and I sent out our own customized holiday cards, commenting in some way on current issues in health policy. Thus, a year after Mr. Bush was elected president, we sent out the following
card:
In the late 1980s, about 35 million respondents to large nationwide surveys declared that they lacked health insurance of any kind. The comparable number now is close to 50 million.
Then, as now, the endless “national conversation” went on and on, pondering
ways to achieve truly universal health insurance coverage, a feat most other developed nations accomplished long ago.
Then, as now, news organizations and the health services research community reported on the financial and physical hardship that many low-income, uninsured Americans face when they fall ill.
And then, as now, the prices for identical health care goods and services were more than twice as high in the United States as they were – and still are – in the member nations of the Organization for Economic Cooperation and
Development. It is why the supply curve of kind acts in the United States shown in the holiday card is far above the comparable curve in other countries. Read more…
Uwe E. Reinhardt is an economics professor at Princeton. He has some financial interests in the health care field.
Once again, on Dec. 3, Elizabeth Rosenthal made eyes pop with her front-page article “As Hospital Prices Soar, a Single Stitch Tops $500.”
The article is part of her series in The New York Times on the high prices of health care in the United States (see, for example, “American Way of Birth, Costliest in the World”).
Perspectives from expert contributors.
As I noted in
an earlier post, there were
news reports more than
a decade ago on the distress
that high prices of health care can visit on Americans with either shallow health insurance or none. Furthermore, some colleagues and I in 2003 drew attention to the high prices of health care in the United
States in “
It’s the Prices, Stupid.” We pointed out that “higher health
spending but lower use of health services adds up to much higher prices in the United States” than in any other member country of the Organization for Economic Cooperation and Development.
But a decade ago most Americans were still well insured by comprehensive coverage with low deductibles and coinsurance, so these stories affected only an easily overlooked minority of uninsured fellow citizens.
For the most part, these stories on prices were ignored by the general public, by the rest of the news media and even by most health policy analysts and the sponsors funding them.
Things have changed and continue to change. Read more…