Health Care Predictions

Yesterday the Supreme Court upheld the Affordable Care Act.

On a meta-level, the decision made me happy-- it shows that at least one of the Supreme Court justices thinks for himself and doesn't always fit into the "Conservative" pigeon-hole that the media likes to put people into.

And I think the decision makes sense on a common-sense level; if it looks like a tax, smells like a tax, and sounds like a tax... then it is a tax.  Even if they decide to avoid the "t-word" and call it a "mandate."

But... I don't think the Affordable Care Act will succeed in making health care more affordable.

If you've read this blog for a while you know I like to calibrate my thinking by making testable predictions. I have a terrible memory, and by writing down what I think will happen then comparing it to what actually happens I teach myself that I'm not as smart as I think.

So besides not making health care more affordable, what do I think will happen in the next 10 years?

Well, I don't think the Republicans will actually repeal the Affordable Care Act, no matter what they say right now.  If Romney becomes president (I'm not even going to try to predict that, I have no clue) they'll repeal some little part of it and declare victory.  If he loses then there will be a huge, noisy debate in Congress that ultimately accomplishes nothing.

After 2014 I predict a whole lot of healthy people will figure out that dropping their insurance coverage and paying the no-insurance-penalty (tax!) is, financially, the best thing to do. After all, if you get seriously sick you can always buy insurance then (no denying coverage for pre-existing conditions, remember?).

If nothing changes, I'd expect a year or two after that lots of small employers decide that paying the penalty to their healthy employees and dropping their coverage is also the smart thing to do.

So in 2018 or so I'd expect there to be a health insurance industry crisis that, in typical Washington "We need Another Law to Fix This Law that We Passed Back Then" fashion, prompts Congress to first try to make it illegal for employers to drop health plans and increase employee's compensation.

When that doesn't work, they'll increase the no-health-insurance-tax so it is more expensive than the least expensive health plan you can buy.

But health insurance costs will continue to ratchet up every year, the IRS will spend ever-increasing money tracking down people who cheat on their no-insurance taxes (there will be laws passed requiring health insurers to report on who has purchased insurance, so the IRS doesn't have to rely on possibly forged documents from taxpayers), and the whole cobbled-together system will be obviously falling apart again in 10 years.

What happens then, I have no idea.  If the Democrats are in power, maybe we'll get a "Medicare for All" single-payer system.

If the Republicans are in power.... I have no idea what they'll do, they don't seem to have a coherent vision for what to do.

If I were King, I'd implement something like this for a national health care plan (inspired by a Megan McArdle proposal that I can't find right now):

1. De-regulate medicine as much as possible. At the very least, make doctor's and nurse's licenses portable across state and national lines and allow nurses to do much more routine health care. If I really were King I'd replace government medical licensing with private licensing, and give people the freedom to legally visit really crappy unlicensed doctors if they were willing to take the risk.

2. Eliminate tax breaks for the World-War-II-wage-controls-inspired "your employee buys your health insurance for you" system that most people are using now to get coverage. Every economist in the world agrees it is a stupid way to pay for health care.

3. Phase out Medicaid and Medicare. Replace them with a single, national, means-tested catastrophic health insurance plan that is simply something like "The US government pays for any health care costs that exceed X% of your adjusted gross income.

We could argue about what X is-- I don't think it should be zero because then people have no incentive to shop around for health care or weigh the costs and benefits of visiting the chiropractor twice a week (that's my problem with single-payer solutions).  Somewhere around 10% feels right to me; you pay out-of-pocket for day-to-day health care expenses, but if you are unlucky and get seriously sick and either lose your job  or have huge medical bills then we'll all chip in and pay for it.  (this is where my libertarian friends disown me as a rotten-stinking Statist)

A system like that should have the right incentives to actually make health care more affordable.

CoinLab and Bitcoin

A friend sent me a link to a GeekWire article about Seattle Bitcoin startup CoinLab raising half a million dollars and asked "is that a good or bad thing?"

It's a good thing!

The long-term vision for the Bitcoin economy is a closed loop-- people earn and spend bitcoins, instead of exchanging bitcoins for some other currency.

Since most people get most of the earnings in the form of a salary, and since I think it will take a very long time (if ever!) before a typical company considers paying employees in Bitcoin, the 'earning' side of the equation worries me most.

That's why I created the Bitcoin Faucet, and that's why I like to see projects like ForBitcoin or FeedZeBirds that give people all of the world ways to earn a little coin. They give anybody with an internet connection and some extra time, anywhere in the world, a way to put their time to productive use.  That's a very good thing.

CoinLab's idea is to let game companies "earn profit from idle users with a custom-branded coin client." The users run a little program and are awarded with in-game items or power-ups. The game companies get dollars.  And CoinLab makes it all work by doing a bunch of behind-the-scenes infrastructure, exchanging the bitcoins that the users create for dollars.

I think CoinLab is being smart by not asking the game companies or users to deal with bitcoins, but instead having them deal with what they're already comfortable with (dollars and in-game commodities).

But eliminating the exchange and paying the gamers and/or the game developers directly in bitcoin would be more efficient, and is an obvious, easy-to-implement feature. Bit-Pay is doing something similar for merchants, depositing dollars or bitcoins or both in their accounts when they receive bitcoin payments.

I think the biggest market for a service like CoinLab will be younger gamers. If you're 15 years old and don't pay rent or electricity then leaving your computer running overnight to earn some in-game currency will be pretty darn appealing. If a whole generation of video-game-playing kids grows up with Bitcoin then the future for Bitcoin will be very bright.

Theoretically it even makes sense if you are paying for the electricity, because CoinLab is essentially outsourcing all of the billing and payment and collection infrastructure to the local electric company. And utility companies are pretty darn good at getting their customers to pay their bills; that translates into a more efficient payment system and lower costs for users.

But... but... what about the environment? What about all those gamers using all that extra electricity to create bitcoins?  THINK ABOUT THE POLAR BEARS!

Big-picture economics lesson: more efficient == better.  Better for people, better for the environment.

Think about the unseen-- if people are (indirectly) using electricity to pay for in-game items instead of using their credit-cards or buying 'game cards' in stores, where does the cost-savings coming from?

That's easy to think about for physical game cards-- there will be fewer produced, which means less plastic manufactured, fewer trucks shipping them from some factory to stores, and fewer car trips to the mall so teenagers can spend a little cash to get their Farmville fix.

It's harder to think about for credit cards, because the costs are really well-hidden. A lot of effort is put into collecting bad debts. I'm sure credit card companies and debt collection agencies spend a lot of money on electricity for their call centers, but most of the cost savings will be fewer people trying to get deadbeats to pay their bills.

That would be a good thing, too! Collecting debts doesn't make the world a better place, and the out-of-work debt collectors will find something more productive to do. Maybe they'll go work for the game company who has a little extra cash and can afford to pay for another customer support person. Maybe they'll go work in a Sierra Club call center, convincing gamers who have a little extra cash (because they paid $10 on their electricity bill for some game stuff instead of paying $10.05 to a credit card company) to contribute to programs that help polar bears...

The People, United, Will Never...

This year's slam-dunk, gonna-pass-with-an-overwhelming-voice-vote article on the Town Meeting warrant is Article 28: "Reversing Citizen's United v. Federal Election Commission."

I'm trying to decide whether or not it is worth my time or the risk of being a pariah to speak against it at Town Meeting. I don't like Town Meeting taking up national issues in the first place; I understand it is a grand tradition, but it seems to me if the people of Amherst feel strongly about a National issue then they should contact their congresscritters about it.

Or maybe if they don't agree with their congresscritter they should form an organization to pool their efforts and try to amplify their voice... like the Citizen's United organization.

I don't like Article 28 from it's very first sentence, which says:

Whereas: the First Amendment to the United States Constitution was designed to protect the free speech rights of people, not Corporations;

Since corporations didn't exist in the US as legal entities until 1811 that's true. Although I'm not sure that is relevant; the First Amendment doesn't give a lot of wiggle-room when it comes to free speech rights:

Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech...

Seems pretty clear to me; there's no exception for "... except if the speech happens to be a TV commercial about a political candidate, paid for by an organization instead of an individual, aired just before an election." There's no way to be sure, but I imagine if TVs had existed back in the 1700's our Founding Fathers would have been producing and distributing revolutionary videos in addition to pamphlets and broadsides. They might have even funded that activity using money from their businesses.

If you read the actual text of the Supreme Court decision (available online), they cite an interesting precedent for "Corporations do have a right to free speech" that I haven't seen mentioned at all-- NAACP v. Button, a 1961 civil rights case where the state of Virginia had passed laws making it hard for the NAACP to find disaffected people and file civil rights suits on their behalf. The NAACP is a corporation, not a person, so I suppose you could argue that the Supreme Court was wrong back then, too-- that the Virginia legislature aught to be able to do whatever it likes to the NAACP because corporations have no rights. Newspapers are corporations these days, too; maybe that means that other pesky part of the First Amendment about freedom of the press doesn't apply, either. Right?

I do agree with parts of Article 28; I think there is too much money in politics. But I don't think passing a constitutional amendment and then making it illegal for corporations and unions to make TV commercials or movies for or against candidates or issues that they care about would change that at all; they would just Find Another Way. If they can't fund a TV commercial, maybe they'll find a celebrity sympathetic to their cause and get that celebrity to promote the cause (and maybe the corporation will make an extra generous donation to that celebrity's favorite charity...).

I'd like to shrink government to lower the stakes; if there weren't millions of dollars in subsidies at stake I'm pretty sure the American Beet Grower's association wouldn't spend hundreds of thousands of dollars every year on lobbying. And if the Federal Government wasn't spending billions of dollars on education I'm pretty sure the teacher's union wouldn't spend tens of millions of dollars a year lobbying the Federal Government.  They'd spend all that money lobbying at the state and local level instead, which seems like the Left aught to support as a political version of "Buy Local."

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Update: passed after zero discussion and a unanimous voice vote.  I abstained.

Election Time!

All two-hundred-and-forty Amherst Town Meeting seats are up for re-election this year; I'm one of 41 candidates running for election in Precinct 9 (the top 24! vote-getters will be elected).

Yes, it is kind of a crazy way to run a Town; I've never bothered to see if there's been any serious research into whether the form of Town government actually makes a difference to their success. I suppose even defining "success" would be hard; New York City is arguably the most successful US city, but I wouldn't live there if you paid me to.

If you're an Amherst voter, go to the Sustainable Amherst website, print out their handy 2012 election guide, and then go vote on Tuesday.

Bully Petition

I can't help it; it seems like I always look at things a little sideways.

Case in point: the petition to get the MPAA to give the movie "Bully" a PG-13 rating.

The argument is:

Because of the R rating, most kids won’t get to see this film. No one under 17 will be allowed to see the movie, and the film won’t be allowed to be screened in American middle schools or high schools.

My first thought is "Darn Right! Bullying is bad! Where do I sign?"

But then I start to wonder: is that true? Does an R rating really mean it won't be allowed to be shown in schools?

Maybe the real problem is inflexible school policies that rely exclusively on MPAA ratings instead of letting teachers decide whether or not their classes are mature enough to hear the "f-word."

So I sent an email to the Amherst schools administration and got a very helpful response:

Teachers are asked to check in with their principals before showing a movie that has not been shown in the past as part of a unit of study. You can go to the arps website under school committee policy manual to read them.

And, indeed, the policy for Amherst Schools has nothing to do with MPAA ratings. Bravo! I'm glad we don't have one-size-fits-all policies.

Of course my third thought on all of this is:  I wonder if showing movies about the bad effects of bullying is an effective way to decrease bullying. It sure seems like it should, but without data from a controlled experiment, I wouldn't bet that it does.

Are Red-Staters Stupid?

Imagine there's a Federal Government program that is designed to help people... oh, I don't know, let's say help people lose weight.

The Program chugs along for years, and then an economist notices a funny thing: the states that get the most money for The Program are full of people who hate The Program. And those same states have the highest rates of obesity!

I see two likely explanations:

1) The Program is doing what it is supposed to do, and putting more resources in the states with the biggest problem. It's not the government's fault that the ingrates in those states don't know what's good for them.

2) The Program is having an unintended negative effect and is somehow making people fatter. The people know this, and that's why they don't like The Program.

Personally, I'd lean towards explanation number 2, but that's because I'm biased towards bottom-up rather than top-down solutions. To actually figure out which explanation was more correct would take some careful analysis.

The above thought experiment was inspired by Paul Krugman's column last week "Moochers for Self-Reliance," where he talks about the fact that Red States get more money per-capita from the Federal Government than Blue States. Because they're fatter poorer.

The possibility that more government spending could make everybody poorer doesn't seem to ever enter Professor Krugman's mind. Which is odd, because he's written quite eloquently about how the Soviets managed to bankrupt their economy by spending lots of money.

Do Nothing

The popular perception is that our do-nothing Congress is going to drive our country into a financial ditch.

Tyler Cowen (one of my favorite economists, even though he's a Bitcoin skeptic) points out that's not actually true.

If Congress does nothing, then a bunch of things will happen which should balance the budget in ten or so years:

The Bush tax cuts will expire. Income tax rates go up for everybody (rich, poor and middle class) and the Federal Government will get a lot more revenue. If you're a Democrat who thought the Bush tax cuts were a really bad idea in the first place then that shouldn't bother you.

The SuperCommittee SuperFailure budget cuts will happen. Military and Domestic spending will be cut. I'd be pretty happy with that, I think we're spending way too much money on our military and don't think we get our money's worth from most Federal government spending.

Medicare spending will be cut, because there will be no "doc fix" to override a law that was passed several years ago that was supposed to limit doctor reimbursement of Medicare expenses. If that happens (I don't think it will), then it'll suddenly become very difficult to find a doctor willing to accept people on Medicare. It would, however, save a ton of money. It would also be a fascinating natural experiment in health-care economics-- given that there's a surprisingly weak correlation between health care spending and longevity or other measures of health maybe we'd all be better off if we collectively spent less money on doctors.

From my perspective, do-nothing looks like a pretty good second-best solution. I'd rather we cut military spending more, kept the tax cuts for people making under $50,000 per year, and implemented Megan McArdle's plan for national catastrophic health insurance. But Congress has shown that it is really good at doing nothing, and I don't expect that to change.