by Chidem Kurdas
Cass Sunstein, the White House regulatory affairs chief, is going back to academia. It is not clear why he chose this particular time to return to Harvard Law School, leaving behind what looked like an experiment to implement the notions he advocated.
Has he made a difference as federal overseer of rulemaking? The record is at best mixed, at worst a prime example of how academic ideas can enable political hypocrisy. Continue reading
by Roger Koppl
The Supreme Court upheld “Obamacare” because Chief Justice Roberts changed his mind. (It seems that “Obamacare” is no longer a pejorative.) In this curious situation, a stalwart of the Federalist Society has become a Big Player in healthcare markets.
A Big Player is a powerful actor who uses discretion to influence a market. In the long run, Big Players are government entities or the creations thereof. They are discretionary actors whose personal discretionary choices supplant known and simple rules. In other words, Big Players substitute the rule of men for the rule of law. The great theorist of the rule of law, A.V. Dicey, said in an important remark that the rule of law “means, in the first place, the absolute supremacy or predominance of regular law as opposed to the influence of arbitrary power, and excludes the existence of arbitrariness, of prerogative, or even of wide discretionary authority on the part of the government.”
Roberts has become a Big Player, and yet the Federalist Society is against that sort of thing. It is committed to the rule of law. Its attitude to the role of the courts is expressed in a passage from Federalist 78: “It can be of no weight to say that the courts, on the pretense of a repugnancy, may substitute their own pleasure to the constitutional intentions of the legislature…. The courts must declare the sense of the law; and if they should be disposed to exercise WILL instead of JUDGMENT, the consequence would equally be the substitution of their pleasure to that of the legislative body.” But the “judgment” of Justice Roberts in this case seems to be very much an “exercise” of his “will.”
Should we therefore castigate Roberts as a hypocrite or ideologue? I don’t think so.
The problem is not that Roberts secretly wishes to impose his personal will on the law. Indeed, the decision seems to be the most restrained possible. It was hardly an instance of “judicial activism” or “legislating from the bench” given Robert’s presumptive political opposition to Obamacare. The problem arises when sweeping measures such as the Affordable Care Act come before the Court. Such laws are ambiguous. Continue reading
by Mario Rizzo
I am not an expert in US Constitutional law, but I am not totally uninformed either. And yet (or because of this) I was shocked to see the completely crazy “analysis” that appeared, as an opinion piece, in the Wednesday, November 16th issue of the New York Times. The author is the anti-trust and health law scholar Einer R. Elhauge of the Harvard Law School. I am somewhat relieved to find that he is not a constitutional law expert either.
Nevertheless, the article is notable for how casually it treats the legal issues. Continue reading
by Mario Rizzo
Although I am an advocate of voluntary birth control, I am not happy about (1) the equation of this choice with healthcare – even preventative healthcare (as if pregnancy were a disease); and (2) the government mandating that health insurers must cover these expenses, without even a copayment. Continue reading
by Mario Rizzo
The recent decision by the Food and Drug Administration (FDA) to revoke approval of the drug Avastin for late stage breast cancer is an action with considerable significance for the future of government financed or subsidized healthcare. The FDA pretends to do a risk-benefit analysis and comes to the conclusion that the benefits are not worth the risks. But since we are dealing with likely terminal cases “risks” must be interpreted with a grain of salt. But, fundamentally, people should be able to strike their own risk-benefit tradeoff, especially in consultation with physicians and due attention to the specifics of their own case. Continue reading
by Jerry O’Driscoll
In today’s (Monday, August 9th) Wall Street Journal, a small business owner provides the calculations on why he is not hiring. He takes his median employee, changes her name, and explains why he must spend $74,000 to provide her with an after-tax salary of $44,000 plus $12,000 in benefits. The risks of higher taxes and mandates are on the upside. And, yes, Obamacare is already adding to his healthcare costs.
Sometimes commonsense economics trumps high theory. Firms aren’t hiring because it isn’t cost effective. The owner could hire more people and expand his business, but it isn’t cost effective.
What would you do to alter the calculation in favor of more employment?
by Mario Rizzo
President Obama, always alert to the laws of economics, is complaining, in effect, that loading up private health insurance with even more mandates seems to be causing rises in premiums.
As The New York Times reports:
“President Obama, whose vilification of insurers helped push a landmark health care overhaul through Congress, plans to sternly warn industry executives at a White House meeting on Tuesday against imposing hefty rate increases in anticipation of tightening regulation under the new law, administration officials said Monday… Mr. Obama will appear in the East Room, where he will highlight new regulations to protect consumers from discriminatory insurance practices, end lifetime limits on coverage and ban unjustified revocations of coverage …Mr. Axelrod likened them to “essentially a patients’ bill of rights, the strongest in history.” Continue reading
by Chidem Kurdas
A big rate hike by an insurance company in California’s market for individually purchased health insurance provided a rationale for the new Obama care proposal. As Paul Krugman explains, the key issue is adverse selection: people who retain coverage tend to be those with high medical expenses.
Those with low expenses tend to drop out in hard times. That increases costs, causing premiums to rise, so even more people drop out—an insurance death spiral.
The solution proposed in the administration bill – as in previous Congressional bills – is to make insurance mandatory. With healthy people in the pool to share the costs, presumably premiums can be kept down. But even passionate proponents of compulsory insurance don’t really believe this, so the President proposes a new federal agency, the Health Insurance Rate Authority, to control price increases.
At this week’s NYU Market Institutions and Economic Processes colloquium, Gene Callahan made a comment that’s the best descriptor I’ve heard for the health insurance situation, though he was speaking of another topic: “However bad our current situation may seem, there is always some reform available that could make it even worse.”
Gene’s adage should be emblazoned on the walls of the room where the President’s health summit will take place this Thursday. Continue reading
by Mario Rizzo
The rule of law always suffers before the political exigencies of welfare state legislation. This is because, contrary to its name, the welfare state has little to do with the general welfare. It is essentially a vehicle by which some groups benefit at the expense of others.
The latest is the sweetheart deal struck with labor unions and government workers to exempt them until 2018 from the 40% taxation of so-called Cadillac healthcare plans. Continue reading
by Mario Rizzo
As the healthcare bill moves quickly toward approval, we might contemplate the words of Ludwig von Mises:
From day to day it becomes more obvious that large-scale additions to the amount of public expenditure cannot be financed by “soaking the rich,” but that the burden must be carried by the masses. The traditional tax policy of the age of interventionism, its glorified devices of progressive taxation and lavish spending have been carried to a point at which their absurdity can no longer be concealed. The notorious principle that, whereas private expenditures depend on the size of income available, public revenues must be regulated according to expenditures, refutes itself. Henceforth, governments will have to realize that one dollar cannot be spent twice, and that the various items of government expenditure are in conflict with one another. Every penny of additional government spending will have to be collected from precisely those people who hitherto have been intent upon shifting the main burden to other groups. Those anxious to get subsidies will themselves have to foot the bill. (…)
An essential point in the social philosophy of interventionism is the existence of an inexhaustible fund which can be squeezed forever. The whole system of interventionism collapses when this fountain is drained off: The Santa Claus principle liquidates itself. (Human Action, Chapter XXXVI, p.858, emphasis added.)
As pleasant as it is to believe in Santa Claus, consider — as it is the Christmas season:
When I was a child, I spoke as a child, I understood as a child, I thought as a child: but when I became a man, I put away childish things. (1 Corinthians 13:11)
We now await all of the consequences unanticpated by the “boundedly rational” social engineers.
by Mario Rizzo
There are two fundamental deceptions in the Senate healthcare bill. They are so elementary that they are often ignored in favor of more technical problems. They are:
1. The various provisions do not take full effect until 2015 or so. Thus the ten year cost totals as estimated by the Congressional Budget Office are misleading, but deliberately so, on the part of the bill’s authors. Only one-percent of the costs are incurred in the first four years. Thus, a $849 billion bill becomes a $1.8 trillion bill when the trick is adjusted for.
2. The elimination of an insurance company’s ability to deny coverage on the basis of existing conditions is an effort to provide a benefit to individuals while hiding the “tax” on the rest. Clearly, insurance rates must rise for most individuals if insurers cannot price according to evident risk. If this were an honest bill there would be an explicit tax to subsidize the premiums of high risk individuals. Costless beneficence is a mockery of the idea of “helping people.” (I do not address the issues of legislative or private alternatives.)
Why should any honest and intelligent person be happy with this? Democracy becomes a delusion when government lies. Of course, this is the usual modus operandi.
by Mario Rizzo
I have previously blogged about healthcare “reform.” (One example is here.) Both the House and Senate bill attacked the tax-advantaged flexible spending account for healthcare expenses. Now there seems to be a move to reinstate it with a maximum of only $2,500.
I understand why the first instinct of economists is to oppose to such accounts. They enable people to put aside money from their salaries before taxes and use it to pay for deductibles, copayments and uncovered medical or dental expenses (for which most people’s insurance is terrible).
Flex Spending Accounts tend to lead to overutilization of healthcare because it changes the terms of the tradeoff between medical and other expenditures. A dollar spent on healthcare costs a person, say, $0.60 (The other $0.40 would have gone to Federal, NY State and City income taxes). A dollar spent on clothing costs him or her a dollar.
However, look at the world in which we live. Continue reading
By Mario Rizzo
If anyone doubts that this Administration and the Democrats in Congress live in bizarre fantasy world he should take a look at what is happening with the funding of Medicare. Continue reading
by Mario Rizzo
For some time I have been interested in the dynamics of public policy – specifically, how particular policies make further policies more likely. Glen Whitman and I explored this in general terms in our paper, “The Camel’s Nose is in the Tent” and our own Sandy Ikeda’s book, The Dynamics of Interventionism offers a different, but largely compatible, general dynamic framework
I believe that dynamic-tendency (or slippery-slope) analysis — if carried on in a coherent theoretical framework with plausible empirical assumptions — can be a powerful supplementary critique of public policy.
The healthcare area seems especially prone to the dynamics of the slippery slope. In this post I wish to point to several factors that will ensure that the current proposals, if adopted, will not constitute a policy-equilibrium. Thus, they will likely lead to more and worse intervention by the state. Continue reading
by Chidem Kurdas
Cost savings from Medicare are claimed as one of the major sources of finance for the new medical entitlement program making its way through Congress, a claim that is astonishing in its brazen disregard of history.
President Obama talks about eliminating waste and inefficiency in Medicare, then turns around and reassures people there won’t be any Medicare cuts. The savings are to come entirely from making Medicare more efficient and paying only for quality service. This notion is not new. It’s been around a long time. Medicare, from its inception in 1965, has been a bottomless pit where money silently disappears into the coffers of the medical-industrial complex. There’s been attempts over the decades to control costs, using a variety of methods.
In the 1990s, when health management organizations slowed down the growth of private medical spending, Congress enacted a law to apply managed care to Medicare. “The program was authorized by the Balanced Budget Act of 1997 with the intent of expanding health care options to Medicare beneficiaries by savings generated through what advocates assumed would be the efficiencies of managed care,” says a 2001 report.
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