Friday, December 12, 2014

Program participants sometimes OVERestimate disincentives; good new book

I commonly hear it claimed that health insurance assistance does not discourage work because the rules are too complicated for people to understand that work does not pay. This claim is full of errors of logic and fact (see here and scroll to Q8). But let's look at one: why should we assume that people underestimate work disincentives rather than overestimate them?

Here's one story in which one man, Dave Campbell, decided to reduce his work hours in order to reduce his income in order to qualify for Medicaid, when it now appears that he probably would have qualified without reducing income.

... when Dave returned to work a few months after the accident, he pared his hours down to meet the $2,100 [monthly] level: why work more when it would all go to Medi-Cal [California's Medicaid program]...

Dave had been getting advice from a social worker and Medi-Cal expert, as well as his very smart Harvard/MIT professor/social-policy expert sister. Nevertheless, it appears that he/they overestimated the program's disincentives (as the disincentives applied to him).

I have not yet read Professor Campbell's new book that contains the full story. I expect that it is very good, because I did read her earlier book and found it to be excellent!

Tuesday, December 9, 2014

Prof. Gruber "No one has ever questioned the quality" of GMSIM

That's a quote from today's hearing (about the 46 minute mark), referring to the Gruber MicroSImulation Model.  It's reminiscent of this quote:

Both claims are contradicted here, especially Chapter 7.

The testimony also said that he was happy to "answer questions about the model and how it works" but I received no reply to the inquiry I sent Professor Gruber by email June 10, almost 3 months before my book would be published containing criticisms of GMSIM.

Wednesday, November 26, 2014

Real PCE per person

Real PCE per person was less in October than in August.  Year-over-year, it has grown 1.4 percent.

Real GDP per capita has grown 1.7 percent year-over-year.

Sunday, November 23, 2014

Reasons to continue the Elmendorf era

Very briefly,
  1. We are fortunate to have their shoulders to stand on.  I find vast amounts of Elmendorf-era CBO research results to be interesting and rock-solid reliable.  The plain fact is that my books and my University of Chicago lectures highlight such CBO material.  I would be handicapped without it.
  2. Elmendorf-era CBO updates as research progresses, without being gullible.  Is there any other DC institution in that category?
Later when I have more time I will elaborate and document these points, and explain why the detractors are confusing the forest with the trees.

Tuesday, November 18, 2014

Professor Krugman continues to misinform readers about Romneycare

Get the economics of Obamacare and Romneycare from Side Effects: The Economic Consequences of the Health Reform.  Especially Chapter 10, entitled "Romneycare times Eleven":

Overall, the ACA erodes nationwide average work incentives about eleven times more than Romneycare did in the state of Massachusetts . Table 10.1 is a good summary of why the differences are so dramatic: the amounts involved and the fraction of the potential workforce presented with a new income or employment tax as a consequence of health reform.
The primary difference between Romneycare and ACA employer penalties is the nominal amount: $ 295 versus $ 2,000 (plus health cost inflation), respectively. Also significant are the facts that the ACA penalty is not business-tax-deductible and that Massachusetts employers are especially likely to offer health insurance even without a penalty.
The subsidized coverage in Massachusetts has barriers to participation that are absent from the ACA and thereby make Romneycare’s implicit [full-time employment tax] less significant. Romneycare came after other permanent forms of assistance for Massachusetts workers leaving [jobs with health coverage], whereas, before the ACA, the federal government had no significant and permanent program for assisting nonelderly nonpoor adults with health insurance while they are not working. Accounting for the prevalence of various taxes, I find that the ACA’s implicit income tax (not shown in Table 10.1) is about eleven times greater than Romneycare’s.

I give the CBO a lot of credit on this. Unlike Professor Krugman, the CBO never fell into the trap of saying that Romneycare= Obamacare, therefore Obamacare has no noticeable effect on the labor market (CBO 2012).

Updated. I answer commenter Veritas with the excerpt below from Chapter 10 of Side Effects.

[The] federal government helped pay for much of Romneycare, whereas the ACA does not turn to any higher power for funding. ...Romneycare encouraged employers in the state to help employees use pre-tax dollars to pay for health insurance, which means that the U.S. Treasury would be passively assisting employees in the form of reduced personal income and payroll tax receipts from Massachusetts. The state also had federal money that was attached to a Medicaid waiver from the federal Department of Health and Human Services (Powell 2012). Thus one should not assume that Romneycare would be elevating Massachusetts labor income tax rates to [the] levels [needed when federal governments expand coverage],

I believe that Professor Gruber videos refer to the Medicaid waiver but, as my excerpt notes, Romneycare had even more federal funding than that.

Saturday, November 15, 2014

CSPAN covers economic impact

At the 4:58 mark, Dr. Aaron acknowledges that "there is a tradeoff." That was a big surprise to me, because Dr. Aaron was the lead signatory on the economists' letter to Congress saying that there is no tradeoff: the ACA both helps people and grows the economy.

Friday, November 14, 2014

Private and Public Comments on Health Cost Growth

Once upon a time, it was acknowledged in academic circles that the ACA did little to cut the growth rate of health care costs. See, for example, 24:05 and following in this video:

But then in this economists' letter to Congress and the American public, the same parties are claiming that the effect of the ACA on health care cost growth is so tremendous (in the direction of less cost) that it would create up to 400,000 jobs EVERY YEAR!

Another (unrelated and) excessively truthful part of this video starts just before the 24:00 mark "The American public doesn't actually care that much about the uninsured.  ...A lot of the uninsured don't care about the uninsured."

Wednesday, November 12, 2014

Leveraging a Lack of Economic Understanding

Anticipated here (italics added): 
A job, Mr. Mulligan explains, "is a transaction between buyers and sellers. When a transaction doesn't happen, it doesn't happen. We know that it doesn't matter on which side of the market you put the disincentives, the results are the same. . . . In this case you're putting an implicit tax on work for households, and employers aren't willing to compensate the households enough so they'll still work." Jobs can be destroyed by sellers (workers) as much as buyers (businesses). Mr. Mulligan reserves particular scorn for the economists making this "eliminated from the drudgery of labor market" argument, which he views as a form of trahison des clercs. "I don't know what their intentions are," he says, choosing his words carefully, "but it looks like they're trying to leverage the lack of economic education in their audience by making these sorts of points."
update: The University of Rhode Island says that it does not have permission to show the entire video. The relevant clip is here (somewhat longer clip here):

More video about ACA design fooling the voters

This is NOT the video from UPenn. This was is from Wash U, and I believe that Fox News uncovered it.

Jump to 30:11 for the discussion of how to undo the tax subsidy for health insurance. And watch for 90 seconds.

#Grubergate : anticipated on the last page of "Side Effects: The Economic Consequences of the Health Reform"

Long before the Gruber video went viral, I had heard the general sentiment. It is NOT a universal sentiment in my field, but prevalent enough that I knew that it had to be addressed in a prominent location. From the last page of my ebook, completed in May 2014:

The book was also written to show that economics did not, and does not, have to be ignored or superficially considered at the policymaking stage.
...Political pragmatists may claim that it is sometimes necessary to ignore economic consequences to support a worthy effort. Even without its pessimistic assessment of the ability of voters to receive information, this argument has been contradicted many times in history when unintended consequences overwhelmed promised benefits.