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Anecdotes

December 28, 2017 Leave a comment

I have been a professional economist for many years and one of the things I noticed early on in my career was how little impact economists have upon public discussion of economic issues. While there are undoubtedly many reasons for this, one obvious reason is the inability of professional economists, particularly academic ones, to communicate with the public in a way which the public understands. Let me illustrate this with two possible ways that we might describe the problems with guaranteed issue, a feature of Obamacare that I have written about in earlier posts which is an important reason for the collapse of the insurance exchanges. Read more…

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RIP Individual Mandate

December 21, 2017 Leave a comment

The tax bill recently voted out of Congress eliminates the individual mandate which was one component of Obamacare. One politician was quoted as saying that this feature of the tax bill is the beginning of the end of Obamacare. It is reasonable to ask if this is true and, I will argue that this is true, although it may be for reasons different from the opinions of this politician.

I have written previously that one of the many flaws in the design of Obamacare is guaranteed issue, the feature which lets people sign up for Obamacare and drop it after receiving medical services. Obviously this aspect of Obamacare is incompatible with the profitability of insurance companies and it is one reason why insurance companies have left the Obamacare insurance exchanges. The elimination of the individual mandate means that fewer good risks, largely those who are young, will buy health insurance on the exchanges, which implies that the applicant pool will contain fewer good risks. That means more losses for the insurance companies selling the insurance and, as a result, higher premiums and/or fewer companies selling the insurance. In other words, the “death spiral” will accelerate to some extent which leads ultimately to the collapse of the Obamacare exchanges.

I really can’t think of a better example of the perils of central planning. And it also reveals what happens when one political party passes a new entitlement program without the support of the other political party.

The Cost of “Bernie Care”

September 25, 2017 1 comment

Senator Bernie Sanders has expressed support for and formally introduced a plan for a health insurance system to be run by the federal government which has been called “Bernie Care” in some media outlets.  A number of other Democratic politicians have also expressed support for this idea. This is quite likely to be the Democratic Party response to the problems with Obamacare. Indeed Barack Obama expressed his own support for this national health insurance program before his first election as President (I saw the videotape of his statements at that time) but he claimed the country was not yet ready for such a health insurance program. What would such a program cost? The Urban Institute has published a study to answer this question. Read more…

Fixing Obamacare

November 15, 2016 Leave a comment

Now that the election is over and President-Elect Trump has begun the transition to his administration, there has been some discussion of reforming the market for health insurance. I have written previously that Obamacare is in the process of collapsing because of its structural defects. For example, the Obamacare feature of guaranteed issue has caused a phenomenon known as adverse selection which is driving insurance companies out of the health insurance exchanges (links to other posts on Obamacare are given below). Here I thought it would be useful to outline some changes that seem to be sensible reforms to the currently-available flawed system.

Read more…

More Fallout from Obamacare

November 11, 2015 1 comment

I recently saw a news item regarding the events at the University of Missouri resulting in the resignations of two senior university administrators.  That article suggested that the Affordable Care Act had a role in the student protests at the university. Turns out that this is indeed the case.

It appears that one of the student grievances, and also one reason for a hunger strike by a student, involves the loss of health insurance by the university’s graduate students. This loss of insurance was explicitly mandated by Obamacare as explained by a university post last August (you can read it here). That web site reports the following.

Due to changes in federal policy and IRS interpretation of that policy, general counsel has informed us that the University of Missouri no longer is allowed to pay for graduate students’ health insurance. (Previously, the university provided a subsidy to those students who opted in for insurance and were paid from a qualifying assistantship or fellowship). The IRS considers our student health insurance plan an “individual-market plan” rather than an “employer-sponsored plan,” such as our health plans for MU employees.

The Affordable Care Act prevents employers from giving employees money specifically so they can buy health insurance on the individual market. Graduate teaching and research assistants are classified as employees by the IRS, so they fall under this ruling.

So the university finds itself in violation of federal law if it pays for graduate student insurance. I wonder how many students realized this element of the university’s policy? I regard this as just another example of the Law of Unintended Consequences arising from central planning by the government. It also reveals that as the law continues to grow in complexity and in size, it is no wonder that it has been said that every day, each resident of the U.S. commits three felonies and has no idea that he or she has done so.

Random Thoughts After a Long Hiatus

September 21, 2015 2 comments

It has been quite a while since I last posted on this blog. I finally decided to catch up by posting a series of remarks on a number of issues that are of interest to economists and (hopefully) others.

Disparate Impact Analysis

I teach in a university economics department. If you were to attend one of our faculty meetings, you would observe that nobody in the room is a seven-foot Chinese basketball player. Does that mean the faculty in my department discriminated against the seven-foot Chinese basketball players in the world who wanted to be on our staff and attend this meeting? If you were to use a nonsensical theory known as disparate impact analysis, then if seven-foot Chinese basketball players were a politically-protected group, the answer is yes and my university could be charged with discrimination in federal court.

To say the least, disparate impact analysis ignores the scientific method which most of us learned in primary school. The fact that a person has the disease known as AIDS does not imply how the person got that disease. The reason is that medical science has determined that the disease can be contracted in more than one way. Similarly, if one group of individuals makes less money than another group, there are many reasons why this may be so.  One of those reasons could be discrimination but how do we know this to be true? Put differently, there are causal relationships in an economy and there are many random events that can make a group of individuals have the demographic characteristics that they have. Read more…

Government as a Unicorn

August 22, 2014 Leave a comment

I recently saw an amusing and informative article by Michael Munger, an economist at Duke University (the article is here). The article concerns how one can explain the behavior of people who advocate more government while, at the same time, expressing disgust with many government policies, politicians, and so on.

Professor Munger has observed academic economists regularly express their disapproval of government actions and then, once they observe what they perceive to be poor policies, advocate more government to fix the perceived problems. This is logically inconsistent in the extreme and he puzzled over this (as I and other colleagues have done over the years) and finally realized that those who advocate more government, after expressing disapproval of government, expect a government that does not exist to solve problems they see. Thus Professor Munger sees his colleagues as wishing for a unicorn to exist. They want government to be what they imagine that it should be, not the one that we have.

For some recent evidence supporting this detachment from reality, consider a liberal economist who recently wrote that we should want the government to narrow the income distribution because this will improve the “supply-side” of the economy. How you ask? Well doing so, which I presume will follow an increase in tax rates paid by the rich however defined, will lead to some programs, programs unspecified by the liberal economist engaging in this advocacy, that will improve the quality of the workforce, thus raising productivity in the economy. So the same government that brought us healthcare.gov, the site so successful that people could not use it, will then turn around and successfully design programs to raise the human capital of the impoverished. To me, this “supply-side” story reveals a staggering ignorance of the reality of government.

I have been an academic economist for many years and I can say, based upon my own observations over the years, that Michael Munger has it right. Many academics are oblivious to the real world that surrounds them.

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