The WSJ reports on the rapid rise and apparent fall of behavior economics within the Obama Administration. It begins:
A little more than a year into its ascendancy at the White House, behavioral economics as a key policy-making tool may be on the wane.
The opening weeks of the Obama administration were a coming-out party for economists who hold that incomplete information, subtle obstacles to participation and confusion tend to make people act in economically irrational ways. Economic policy can “nudge” people and institutions into more efficient, economically beneficial behavior without heavy-handed command-and-control measures in regulation and legislation, they argue.
Cass Sunstein, co-author of the behaviorist bible, “Nudge,” took up residence at the White House Office of Information and Regulatory Affairs, while behavioral economist Jeff Liebman is acting deputy director of the Office of Management and Budget. Yet another true believer, Austan Goolsbee, took a seat on the Council of Economic Advisers.
At this time a year ago, the order of the day was disclosure, transparency and light-touch policy proposals, such as automatically enrolling workers into 401(k) plans and simplifying student-loan forms.
But in recent weeks, President Barack Obama has proposed regulating health-insurance rate increases, separating commercial banking from investing on behalf of their own bottom lines, and prohibiting commercial banks from owning or investing in private-equity firms or hedge funds.
Indeed, the proposal to regulate health-insurance rate increases is among the most heavy-handed regulatory proposals to surface in years, and would amount to de facto price controls.
Mario Rizzo says:
Might this be the unintended consequence of the various criticisms that have been launched against “libertarian paternalism,” including my own? Gulp.
March 8, 2010, 9:18 amd says:
I used to be affiliated with an insurance company that was subject to loss-ratio controls. Well – they never reduced premiums on really successful loss-ratio policies. At least, until the government came in and said: hey you guys violated the loss-ratio control. They ended up having to return the money over time. It resulted in perhaps one price change. There was no incentive to lower premiums and it was easier administratively to keep the status quo.
The problem with the insurance business model in some states is that loss-ratio requirements are anti-capitalist. The idea that you can earn too much money. If there is a profit-ratio limit where overhead doesn’t get calculated, then the incentive to lower administrative costs isn’t there.
Personally, I think the problem is negotiating power. Doctors versus insurance companies. You versus Bank of America. Most Americans do not have any negotiating strength. We’re basically a nation of adhesion contracts at this point and that creates a lot of economic savings but also economic distortion. So when Quest labs sends a bill to Blue Cross Blue Shield for $200 on a lab test and gets back $50, we have a serious problem.
If the insurers are always going to call “Usual and Customary” expenses a fraction of a posted charge, then the service providers have the incentive to raise face prices to receive value. Again, this problem comes from the negotiating strength of the purse string. It’s the golden rule: He who has the gold, makes the rules.
Fairness to the other side is admitting that health consumers often don’t shop around, but that is partly because health consumers don’t generally discriminate based on cost, and partly because of ineffective market disclosure.
In conclusion, because the market has shown no incentive to simplify itself, I don’t really have much of an issue with shoving things along.
March 8, 2010, 9:54 amFrancis says:
Utilities have their rate increases approved by public utility commissions, and somehow it hasn’t been the end of capitalism. Since health care insurers have proven themselves incapable of delivering the services desired by society as a whole under the existing rules, it looks like we’re going to have to try the utility model.
March 8, 2010, 9:57 amsardonic_sob says:
Setting rates for all the things health care companies do/bill for/pay for is exactly one billion and six* times more complicated than setting utility rates. Also, we don’t introduce new ways to test/generate/improve/deliver/use** electricity every damn day, all of which cost new fortunes to invent, test and implement although not being applicable to more than a tiny fraction of the intended customer base, which everybody wants but nobody wants to pay for.
Public utilities are a demonstration that government monopolies aren’t necessarily NOT workable in all conceivable circumstances. They are not a demonstration that anything but public utilities make any sense to enforce government monopolies over.
Incidentally, since we don’t all get free electricity in unlimited amounts, I would argue that the public utility model is not delivering the services society as a whole wants either. Replacing a failed model with another failed model is outside-the-box thinking, I’ll grant you, but the plan would not inspire great confidence in me personally.
*Prove me wrong.
**Well okay maybe that last one.
March 8, 2010, 10:22 amAllan Walstad says:
Can we expect to see Sunstein resigning in a huff?
March 8, 2010, 10:30 amDaniel Chapman says:
That WOULD free him up for a SCOTUS nomination…
March 8, 2010, 10:39 ambyomtov says:
President Barack Obama has proposed regulating health-insurance rate increases, separating commercial banking from investing on behalf of their own bottom lines, and prohibiting commercial banks from owning or investing in private-equity firms or hedge funds.
So banks should be able to use deposits (insured ones at that) to make highly risky equity investments? Sure. What could possibly go wrong?
March 8, 2010, 10:47 amSteve says:
How can it be “one of the most heavy-handed regulatory proposals to surface in years” when most states already do it? It’s hardly a radical idea.
March 8, 2010, 11:00 amRicardo says:
But in recent weeks, President Barack Obama has proposed regulating health-insurance rate increases, separating commercial banking from investing on behalf of their own bottom lines, and prohibiting commercial banks from owning or investing in private-equity firms or hedge funds.
I’d agree that regulating health insurance premiums sounds like a very bad idea. It will simply lead to more people being pushed into state high-risk pool plans which are subsidized by the state. Where is that subsidy money going to come from?
But the attempt to connect all this to behavioral economics is quite a stretch. Obama was clear from the start of his campaign that reform in regulation of both health care and finance was high on the agenda. I’m not a subscriber so I couldn’t read the full article but I don’t see any evidence that Obama ever had any “nudge-like” proposals in mind in either of these two areas.
Moreover, I wasn’t aware that commercial banks ever could invest in hedge funds but, yes, they absolutely should be prohibited from doing so. The entire point of a hedge fund is that it is a completely non-transparent, non-SEC-regulated fund in which extremely wealthy, supposedly sophisticated investors can gamble their money. There is absolutely no justification for a deposit-taking enterprise to invest money in such a fund — it runs completely contrary to the bank’s fiduciary obligations to its depositors and its shareholders.
March 8, 2010, 11:17 amPete Freans says:
National Review has an interesting article about NYT journalist Tom Friedman. While the thrust of the article is about the rhetorical gymnastics of Mr. Friedman, the latter portion speaks about Mr. Friedman’s secret admiration for authoritarian China. In a nutshell, authoritarian regimes are more efficient because they don’t need to take into account that sticking-point we like to call democracy. While the article asserts that the Obama Administration has adopted Friedman’s talking points in their entirety for a Green Revolution, it’s not absurd to believe that they also agree with his views about a more efficient manner of governance. The frustration that President Obama and Democrats have shown over the health care debate is indicative of their shove-loving tendencies.
March 8, 2010, 11:21 amray_g says:
I, and many others, pointed out from the beginning that anyone who would use the oxymoron “libertarian paternalism” would inevitably move from ‘nudge’ to ‘shove’ when the nudge did not accomplish what they wanted. Let’s hope that idiotic phrase disappears forever.
March 8, 2010, 11:24 amAssistant Village Idiot says:
Francis “…services desired by society as a whole.” That phrase scares me a little.
As to nudge, its meaning varies according to the speaker, the extremes being a mafia don and a maiden aunt (Bertie Wooster’s aunt excepted).
March 8, 2010, 11:38 amJay J says:
I’ve been trying to get a good answer to this question for a while, and this thread looks like it might be the place for me to get it:
Pretending we live in a world where community rating, guaranteed issue, and mandates are the law, what should we do to keep premiums/costs under control?
I know some would answer “that just goes to show that this whole health care reform is wrong headed.” But see I have seen more vociferous complaining about the proposed premium control commission than I have about anything else, so it’s almost as if the prospect of Obamacare has gotten much worse since the suggestion that we have a premium control commission.
But we can’t look at this in a vacuum. For example, I’m not crazy about mandates, but if we’re going to prevent health insurance companies from discriminating according to preexisting condition and the like, then we have to have mandates to prevent adverse selection. But once we have mandates, we have to have some way of keeping costs from going sky high or raising very quickly. You can say that this proves the wrongheadedness of the whole plan if you like, but that’s not what I hear a lot of disapproving observers saying, rather, it’s as if they were sorta ho-hum about their disapproval of the plan before, but now incredulous at how Obama could suggest a de facto price conrol.
So, again, pretending we live in a world where community rating, guaranteed issue, and mandates are the law, what should we do to keep premiums/costs under control?
March 8, 2010, 11:46 amNunzio says:
Jay J,
If that’s the world we live in then we should just have high deductible/out of pocket catastrophic policies along with Health Savings Accounts.
For those who can’t afford these policies, and for those who can’t afford day-to-day medical expenses that do not reach the policy minimum, then the government can provide some subsidy over 5% of Adjusted Gross Income.
March 8, 2010, 11:52 amJay J says:
What I read does not say that the adoption of Libertarian Paternalism lead to “heavy handed” regulation. It says that Obama’s adoption of this kind of regulation does not appear to be consistent with the spirit of the Nudge.
For all we know, the regulation (that is frowned upon here) would have gone through anyway. It could be that Sunstein, Goolsbee, etc, moderated it, or were irrelevant to it. But I don’t see any reason to think that their views are the cause of it.
March 8, 2010, 11:52 amThorley Winston says:
If one believes these polices are bad, then the solution is to change the bad policies not simply layer on another or even worse set of polices on top of them.
That’s part of the reason why Obamacare is so inherently flawed. It takes bad polices like State-imposed benefit mandates and adds new ones at the federal level so people are forced to buy prepaid health care rather than actual insurance. It discourages the use of Health Savings Accounts and high deductible policies which (surprise, surprise) means that people will be paying even higher premiums than before.
March 8, 2010, 11:59 amJay J says:
Nunzio,
Thank you. But I suppose I didn’t specify the background of this hypothetical world carefully enough.
I’m assuming that we live in a world like this one, and insurance is roughly like it is here in the U.S. And then I assume that health insurance companies aren’t allowed to discriminate based on preexisting condition or how costly someone’s insurance is. I go on to assume that to solve the adverse selection problem, we impose mandates.
Now, if we’re going to go with “high deductible/out of pocket catastrophic policies along with Health Savings Accounts” then I’m not sure we’re even talking about the same hypothetical.
It seems to me that leaving everything alone with community rating and mandates looks better to many people on the right than leaving everything alone with community rating and mandates, adding Obama’s premium control commission. And that’s doesn’t make sense to me.
March 8, 2010, 12:03 pmHarry Schell says:
My issue with “shoving things along” is the unproven assumption that government can shove anything along and make it work better. I say “unproven” as the record of failure is far longer in length, depth and breadth than of success.
Further, statism rests on the assumption that regular people are just too stupid to make the “right” choices. The regular schlubs need people like Sunstein, Obama and Pelosi to set things aright for them. See the debate this weekend between Robert Reich and George Will for a perfect illustration of this mindset at work.
And the shift in Obama and cadre’s attitude from nudge to shove reflects impatience that the schlubs aren’t with the program. Obama and others have commented on healthcare how people “don’t understand” and “will love it when they have it”. This is more of the same disdain for all us stupid people outside the echo chamber of the anointed “smarties”.
Of course Obama chose most of his cadre from politics and academia. Many of their pet ideas don’t work anywhere else.
Well, tell me, punks, how stupid do you feel? Are you going to draw on the great smarties or do as you are told?
March 8, 2010, 12:59 pmSeaDrive says:
I think it’s accepted that posted rates are a much higher than market rates (as negotiated between insurance companies and service providers). I’d be interested in an expert opinion of whether this actually distorts the market, and in what way. About the only people without protection against these high prices are those without health insurance, and they don’t pay them because they don’t have the money. I think many doctors (not all) charge the uninsured at closer to market rates out of some mix of realism and compassion.
I also think the government, often quick to guard against gouging in other contexts, could find a way to prevent a doctor or hospital from charging an individual five times what they would get paid by Aetna or Medicare for the same service.
March 8, 2010, 1:10 pmCarl The EconGuy says:
Jay J asks: Pretending we live in a world where community rating, guaranteed issue, and mandates are the law, what should we do to keep premiums/costs under control?
I can only see this answer: since you have just raised demand for health care a lot, you must then reduce consumption of health care for the rest of the population. You can do that by taxing consumption, e.g., eliminating the tax free health benefit from people’s paychecks and tax it as income. You can also do it by allowing more competition into the insurance market, e.g., by letting insurance companies compete for any package they want to offer, across state boundaries. You can do it by increasing copays and deductibles from public plans, like Medicare, and introduce pay-based-on-income for all Medicaid claimants, with a minimum payment required for all — methods that have been shown to be effective in reducing demand. You can reduce tort claims. All of these methods have been proposed, and rejected for various political reasons. Whose gore do you want to ox?
Of course, you could also increase the subsidies for the health care industry and raise supply, hopefully driving prices down by building more hospitals, and training more docs and nurses. Takes time, and hides the costs inside the tax system. It works, just look at US food prices — very low, compared to other countries, because we subsidize a lot of it with tax money. We’d see very high food prices if we subsidized consumption and not production, right? There’s health care for you.
What you can’t do is the Obama way, i.e., try to control costs by regulating consumption of health care through the nudge&shove by the Cass Sunsteins of the world. Health care is just too complicated for that, I believe, and the market (docs, hospitals, insurers) will stay at least a leap and a bound ahead of the regulators. If you reduce reimbursements for this, they’ll buy some of that, as a tie-in with this. In a constrained market, docs will find a way to earn their incomes, and insurance companies don’t earn more than a competitive rate of return as it is, so you can’t gore them much without driving them out of business, keeping rates up.
The problem with Obamacare, I think, is that it always started from the wrong end. The answer is government run health care, as in the European welfare state — now what was the question? What’s taken them so much time is to define the question in such a way that they get as far as they can towards government health care, and leave the rest for another fight, another day. They know the answer, so the problem is just to define the current policy question in order to create political momentum over time. Coverage, cost, insurer evil, pre-existing conditions, whatever. Pile it on. It’s such a dishonest way to go about it, but of course we can all see right through it. Controlling cost is not on the agenda at all, and the talk of it is just spin. It’s about the welfare state, pure and simple, and then we’ll all stand in line for health care, as they do in Europe. Why that should be an attractive option is not clear.
March 8, 2010, 1:22 pmDavid M. Nieporent says:
Death panels.
March 8, 2010, 1:43 pmAllan Walstad says:
Huh?? So that utterly nonsensical notion is just a given, now? It’s not insurance if you can get coverage after the fact, unless the premiums are to be very high, indeed. The idea is equivalent to my being able to buy home insurance after somebody has fallen and injured themselves on my property, and expect to have the insurance company pay a million dollar claim. If such were mandated by the feds, who do you suppose would actually pay the bill? It would be the folks who paid their premiums for years on end, to cover themselves for the possibility of such an accident. They would pay the bill in higher premiums.
This whole idea of requiring insurance companies to accept customers with pre-existing conditions and pay their bills is just another massive taxation scheme without the honesty of simply imposing the taxes and subsidizing the medical care. In other words, this idea that if A,B, and C make regular payments to D in return for D’s coverage of certain risks, then those folks are somehow by this very arrangement liable to pay E’s bills, is nothing more than robbery in the guise of regulation.
March 8, 2010, 1:57 pmJay J says:
Allan Walstad,
The reason I treated what I did as a given is that I perceive that some on the right are opposed to community rating and mandates, but not passionately so, while at the same time passioantely opposing price controls. This doesn’t make sense to me.
Though I don’t have time right now, I’ll take a close look at Carl The Econ Guy’s post, maybe he has the answer I’ve been looking for.
March 8, 2010, 2:06 pmsardonic_sob says:
I have a sibling who is a fairly highly-placed finance official at a hospital in an area with a large Amish population. The Amish pay cash for everything, and don’t buy medical insurance. When somebody in their community has catastrophic needs, they rally round and raise money. It works about like you’d think it works.
What my sibling told me that I *didn’t* know – and lots of other people don’t either, I bet – is that the Amish, while not sophisticated, are not stupid. (That I knew, I’ve been around them. But I didn’t anticipate this particular non-stupid response.) When they have large medical bills, they find out what Medicare pays for the equivalent service and that is what they will pay. They will not pay more, not a penny, not even if you threaten to sue them. Their argument is that since that is what the hospital is willing to take for the services that is what they cost and that is what they will pay. Since suing Amish people is a PR nightmare, especially since they *are* very good about paying up to that point, the hospital just doesn’t push it.
Imagine the consequences if all of us started doing this.
A while back when my daughter had some ongoing medical expenses and it looked like my insurance might stop covering them, I told my wife that that was exactly what I would do – go to the provider with my EOB, say, “I know your posted rate is X, but as you can see from this EOB, you took Y* from my insurance company. I will pay you Y, in cash, every week immediately upon receipt of services,” and see if they’d take it. If not, I would have found a provider who would. They can’t *all* be morons.
I hope not, anyway.
*The services were billed hourly, with the “official rate” being listed and then next to that the “Provider Discount” which was subtracted. The discount was approximately 60%. I kid you not.
March 8, 2010, 2:10 pmscattergood says:
According to the article:
Um, but since also according to the article the Obama admin had embrace:
So the ‘incomplete information’ problem only affects non governmental individuals and entities but it doesn’t affect policy makers, economists, and members of the legislature? What hubris and stupidity.
March 8, 2010, 2:30 pmAllan Walstad says:
Jay J: Fair enough. You comment was the stimulus for my brief rant, but you weren’t necessarily the object. Sorry.
March 8, 2010, 3:00 pmTatil says:
Considering commercial banking receives a lot of taxpayer support, this separation makes a lot of sense to reduce the risks taxpayers face, as they never share in any of the profits when those risks pay off, but get stuck with the bill when they don’t. Adding this to the list of regulatory changes exhibiting the “rise and fall of behavior economics” is like politicians including unrelated pork barrel earmarks into unrelated, but popular legislations at the last minute.
March 8, 2010, 3:32 pmAriel says:
FWIW, utilities actually make a great example for the other side of the argument. If you look at what was going on with phones before cell phones effectively caused the de-utility-ificaiton of the home phone industry, together with cable competition, it’s really dramatic. I used to work in the telecom industry and it’s amazing how much competition has driven costs down over the last couple of decades, while quality of service has gone up. Perhaps this is not the end of capitalism, but it’s a big step away from it – and it’s not like we haven’t been down this road before, e.g., in telecoms, and we know that things got better when we left it behind. In fact, because entry of wireless competitors is highly regulated, we can look at prices vs. deregulation in a very convincing way across countries – and if you do so, you will see that going away from the utility model dramatically improved the benefits for consumers.
March 8, 2010, 4:21 pmJay J says:
Allan Walstad, no problem at all.
Carl The EconGuy,
I don’t see what Cass Suntein and his philosophy of the Nudge has to do with anything. The entry seems to indicate that the Administration is acting contrary to Sunstein’s view, or that Sunstein, Goolsbee, etc haven’t been that influential in setting policy. It could be that their views are marginalized, or that things might have been worse without them. Again, there doesn’t seem to be reason to think that their Nudge turned into a shove, rather than that their advice to Nudge was ignored.
Now, closer to the central issue, you say a lot of things that are compelling to me. What do you think of Milton Friedman’s idea that we have catastrophic single payer insurance? One thing I’ve wondered about is how to draw a line between routine and comprehensive care. Anyway my view is fluid, if that isn’t already obvious, and I’m drawn to the argument that we should expect markets for routine health care to function like any other market, but I’m also compelled by the argument that people just can’t save enough for the rainy day when they get cancer. So it seems like people are gonna pay whatever they can to treat a serious illness, and that the left is correct that people’s financial lives can be destroyed by serious illness. It also seems like people aren’t going to be in any hurry to consume cancer treatments, no matter how subsidized they are. All this seems to favor Friedman’s view. Any thoughts?
March 8, 2010, 9:37 pmRicardo says:
The issue is that Sunstein and Thaler never said nudges are always the best solution for every conceivable public policy problem. The issue of systemic risk in financial markets is very important and there is every indication that the way to mitigate it really is to impose risk controls and standards on financial institutions regarding who they lend their money to and where they invest their money. The New York Fed was compelled to intervene in the Long-Term Capital Management fiasco exactly because so many institutions had billions of dollars of exposure to the fund.
Yet regulators seem to have learned almost nothing from the episode. Nudging isn’t necessarily the best way to solve the problem of lots of financial institutions having huge leveraged positions in hedge funds that they don’t actually know the first thing about and Thaler and Sunstein never said anything to the contrary.
March 8, 2010, 11:14 pmJay J says:
Ricardo,
You effectively point out that Sunstein, Thayer, etc, don’t even assert that nudging is always the best policy.
OK.
But I perceived some of the comments here to be claiming vindication for a prediction that once you allow the government to Nudge, it will eventually grow into a shove.
Your point is that Obama never even claimed that Nudging would be his main or only method, and that Sunstein and Thayer never denied that Obama’s relevant regulatory plans were misguided. Therefore, there’s no condemnation of Libertarian Paternalism.
Again, OK.
Allow me to try to recover from missing the most relevant facts and therefore missing the most parsimonious reply to try and stress anyhow that even if Obama eventually contradicts specific proposals that Libertarian Paternalism would advocate, it won’t necessarily mean that the Nudge has turned into a Shove. I think some have certain views about what granting government authority will do, and so they’re very quick to see these expectations vindicated. If for example John Doe expects Libertarian Paternalism to lead to plain old-school paternalism, and those who advocate Libertarian Paternalism are in government when plain old-school paternalism is implemented, then John Doe will say “I told you so, I knew Libertarian Paternalism would turn out this way.” My point is that a higher burden should be assumed before predictive success is declared.
March 9, 2010, 12:33 amInstapundit » Blog Archive » CHANGE: From “Nudge” to “Shove.” says:
[...] CHANGE: From “Nudge” to “Shove.” [...]
March 9, 2010, 2:21 amegoist says:
Changed from freaks to control-freaks.
March 9, 2010, 6:10 amMike K says:
A couple of points. The difference between the “retail” charges that you see on your bill and what the doctor is paid may be as much as 80% if it is Medicare or 60% if you are a private patient. With the hospital bill it is harder to find out as many of these “contract rates” are trade secrets. For example, many of us have a high deductible policy in which we pay 20% and the insurance pays “80%”. The “80%” the insurance pays may be less than the 20% you pay. You are paying 20% of the retail bill. They are paying the negotiated rate that you don’t get to see.
Second, many doctors do charge the uninsured less but it is illegal in the case of Medicare. Doctors have a “Medicare profile” that determines their fees. They are actually paid about 20% of that retail fee. The profile is set when the doctor starts practice and so there is an incentive to set it as high as possible because, once set, you have no control of it thereafter. If I as a surgeon sees a young waitress with bad hemorrhoids who has no insurance, I can charge her a much lower fee than I would charge a patient with “Cadillac” insurance. But I had better not get caught. Medicare, by law, is entitled to the lowest fee charged in the community. If they should learn that I am charging cash patients a lower fee, they will reset my profile to that amount and then pay me 20% of that.
Now, I did it and wasn’t caught but you can see the pressures. All insurance work is done, in California at least, on contracts with negotiated rates. When I retired, I had 276 contracts with various entities. That finally forced me to buy a $36,000 computer system to keep track of all the different requirements. I was once fined $500 by an HMO for sending a $36 lab test to the “wrong” lab.
Of course, I was a dinosaur who had been in a small (Two to five surgeons) private practice for years and was not in a big group. Young doctors coming out of training are not interested in that “cottage industry” and are interested in vacation time and limited work schedules because they know their compensation will be limited. High stress, and formerly high paid, specialties like general surgery now do not fill residencies and will soon see severe shortages. The increase in the percentage of women in medicine also has changed the work hours and schedules, just as those admission committees predicted in the 60s when women were discriminated against.
The current trend among more senior physicians, by which I mean those whose student loans are paid or who did not have them, is to drop Medicare, and many are dropping all insurance, and setting up cash practices. They charge “retainer fees” or annual subscriptions (the same idea), or some charge by time (15 minute increments). They do not accept any insurance and the surgeons with which I am familiar have set their fees at about what they were being paid by insurance and Medicare. For example, the busiest hip replacement surgeon in a nearby area has dropped all insurance and charges about $1200 for a total hip. That is what he was being paid by Medicare. He has reduced his staff because insurance billing does not require four people. He is happier, I assume since it was voluntary. Patients continue to fill his schedule. I think this is a growing trend and will wreak havoc with Obamacare. If you want to read more, Google “retainer practice.”
March 9, 2010, 7:26 amPericles says:
Dr. Mike K,
The last sentence of your post is what I fear is the bottom line of government-run health care: if they don’t control all providers and consumers, a private market will develop that over time will undermine their system. Thus, the good bureaucrat’s response will be to make such private transactions illegal. Ultimately there will be no choice in health care except the government’s choice.
March 9, 2010, 7:52 ammemomachine says:
Hmmm.
“Can we expect to see Sunstein resigning in a huff?”
I would be willing to settle for a “minute and a huff”.
March 9, 2010, 8:01 amMichael Smith says:
Forcing one man to pay another man’s doctor bills is no more justified than forcing one man to pick another man’s cotton.
March 9, 2010, 8:02 amRichmondG30 says:
Steve says:
How can it be “one of the most heavy-handed regulatory proposals to surface in years” when most states already do it? It’s hardly a radical idea.
Really, Steve? Can I have a list of those states that require their citizens to purchase health insurance under the penalty of jail time? I’d like to make sure I don’t move into any of those states by accident.
March 9, 2010, 8:06 amCarl The EconGuy says:
@Jay J
First, like most economists, Friedman viewed health care as just another something to consume, like lollipops or Swedish massages. That sets economists apart from most normal people. Most of us don’t buy the argument that your health care is too important for you to control or too complicated for you to understand. So most economists, I believe, would opt for market controls — but that would mean tearing down all the insurance controls we’ve put in.
And it would also mean basically eliminating the model of employer provided health insurance, by stopping the tax-free subsidies we now give them. If we let the market go, we would see a rich menu of products, tailored for a very diverse audience, with all kinds of new insurable pools forming, like small employers or farmers or lawyers, etc. etc.
In such a model, like any pure market model, some folks will have trouble finding appropriate insurance, either because the group they belong to is too small to create an insurable pool, or because they can’t afford it. That’s where Friedman would suggest creating a govt-subsidized pool for the small groups, and income subsidies (or tradeable vouchers, since it’s Friedman we’re talking about!) for those we think we need to assist. Do that, and you can kill off Medicaid. Over time, you could also do away with Medicare, just stop subsidizing those who don’t need it. Lots of folks on Medicare can/could pay for their own health care, including long term care, if they bought it early enough, and the rest we can voucherize. Some people also think that a pure market would encourage “free riders”, by which they mean that healthy people will buy cheap insurance, raising the price for sick people — but what they really mean by that is that they think it’s unfair that some people don’t have to or don’t wish to consume health care, so that argument is not a pure free rider argument but a social-justice one. Which leads to the general point that if you confuse efficiency arguments (cost and choice!) with other arguments (equality and access!) you’ll get a policy mess — welcome to health care in America, my friend.
Second, then, why all this meddling that we currently see in the health care market place? Back to Sunstein, on the liberal side. Without telling people outright what they can/can’t have, US health insurance is nudged&shoved to provide a basket of goodies that the besserwissers (great German word meaning “those who are in the know”) of the administrative state think you should have, including setting the screwy reimbursement rules of Medicare and state-fed cost sharing rules of Medicaid, with all the distorted choices that leads to. Under Obama-care, we will just continue to walk down that road, so that’s what I meant by my reference to Sunstein, and why I don’t think govt controls can really resolve the complicated decisions in both insurance and health care delivery. On the libertarian side, the arguments they have to struggle with is that we have a political system that invites corruption. All the special interests and deals in Congress, designed to get members reelected, place an institutional constraint on how free the market will ever be allowed to become. Politicians have meddled with insurance controls at the state level because insurers are a powerful political pressure group. Same thing at the fed level — just look at drug manufacturers, hospital industries, public sector unions, AARP, AMA, etc. etc., and ask what they pay to keep their hands in the cookie jar. As much as I’d like to see real market reforms in health care, I don’t think we’ll get there without reforming politics, and good luck with that one.
Meanwhile, back mucking the stables in Congress, is Obama trying to move from a nudge model to a push model in health care. There’s no doubt that his health care exchanges will reduce competition in insurance, reducing the choices available in favor of a federally mandated and nudged&shoved insurance baske, and that he will force people to buy private insurance, whether they want it or not (constitutionality of that, anyone?). To keep prices down, Obama-care will also tinker with reimbursement rates and reimbursable health practices — in a field that is subject to very rapid research and technology, and that’s not likely to work either.
It’s enough to drive one to despair, or at least to the nearest bar.
March 9, 2010, 8:35 amkentuckyliz says:
It is extremely arrogant for the government to think that it *should* Nudge or Shove.
I’m an anti-Nudger. Eff the Nudge. I’d even wear that T shirt with the un-niced word spelled out fully, at some peasants with pitchforks rally.
March 9, 2010, 10:30 amAD says:
Price Controls…
March 9, 2010, 2:27 pmThose have always worked so well in the past.
Constitution First says:
… with the NSA preparing high tech filters to spy on internet users; expect Chicago persuasion in answer to political dissent… How did Andy Sterns, SEIU union boss (thug-in-chief) phrase it? “If we can’t convince them using the power of persuasion, we’ll use the persuasion of power”. What part of that statement is unclear to you?
This better not come as a surprise to anyone, from every opposition pundit to 0-Bambi himself made it perfectly clear: “your life will never be the same” what part of that didn’t you get?
Andy Sterns has been the most frequent visitor to the WH by several orders of magnitude more than our military commanders or any economic advisor. Still unsure of 0-Bambi’s intended direction?
When George Soros said he bought and paid for the Democrat party, looks like he wasn’t kidding.
We now have an anti-Semite, Nazi collaborator (Soros) running the presidency, using a sock-puppet.
March 9, 2010, 2:33 pmEsteban says:
Alan Walsted said it quite well already. But don´t you see? This searching for victims is part of the problem that is destroying our culture. Oh those big mean insurance companies – they are so darn “discriminatory” against people with pre-existing conditions. Hey softy. Guess what? Insurance companies insure against the RISK of illness. Requiring them to pay for pre-existing conditions is NOT insurance. That would be called a PAYMENT PLAN. If insurers are required to pay for guaranteed losses they will adjust rates on the risks they actually take. That means responsible and honest people pay, while the abusers, loafers, n´er-do-wells and frauds jump in for the benefits at the last minute without contributing to the system. Maybe it´s just me (I know it´s not) but that just doesn´t seem right.
March 9, 2010, 4:36 pmChester White says:
Price controls have been repeatedly tried since at least the time of Diocletian.
Why THE HELL do we have to keep having idiot politicians advocate for them? A goddam PIGEON in a psych experiment learns faster than these mental defectives.
March 9, 2010, 10:41 pm