Topic: Health Care & Welfare

Members of Congress Introduce Cato ‘Large HSAs’ Concept

WASHINGTON, DC - JANUARY 29: (L-R) Sen. Jeff Flake (R-AZ), and Sen. Patrick Leahy (D-VT) speak at a press conference on Cuba at the U.S. Capitol January 29, 2015 in Washington, DC. Flake is introducing legislation with bipartisan support that would lift a longstanding ban on U.S. citizens traveling freely to Cuba. (Photo by Win McNamee/Getty Images)

Sen. Jeff Flake (R-AZ), Rep. Dave Brat (R-VA), and other members of Congress have introduced legislation based on the “Large HSAs” concept I first proposed here and developed herehereherehere, and here.

The “Health Savings Account Expansion Act” (H.R. 5324S. 2980) would expand the availability and benefits of tax-free health savings accounts (HSAs) in several ways. It would nearly triple existing HSA contribution limits from $3,400 for individuals and $6,750 for families to $9,000 and $18,000. It would allow tax-free HSA funds to purchase health insurance, over-the-counter medications, and direct primary care. It would eliminate the mandate that HSA holders purchase a government-designed high-deductible health plan. And it would repeal ObamaCare’s increase of the penalty on non-medical withdrawals. Americans for Tax Reform and FreedomWorks have endorsed the bill.

I’m sure I will have lots to say about Flake-Brat, but here are a few initial impressions.

  1. Flake-Brat would free workers from the government program we call employer-sponsored insurance—but only if that’s what workers want. The federal tax code currently tells the average worker with family coverage she can either surrender $13,000 of income to her employer and let her employer choose her health plan, or surrender a huge chunk of that money to the government by paying income and payroll taxes on it. The Flake-Brat bill would allow her to keep that money and either save it, use it to stay on her employer’s health plan, or use it to purchase better coverage somewhere else, all tax-free. The choice would belong to her, not to Congress or the IRS.
  2. Flake-Brat is a bigger tax cut than you’ve ever seen.  Large HSAs would be the largest-ever scaling back of the federal government’s role in health care. The Flake-Brat bill is effectively a $9 trillion tax cut. That’s how much money the current tax exclusion for employer-sponsored insurance will divert from workers to their employers over the next decade. Flake-Brat would return that money to the workers who earned it. Flake-Brat is thus an effective tax cut equal to all of the Reagan and Bush tax cuts combined. It is nine times the size of the tax cut associated with repealing ObamaCare.  Unlike health-insurance tax credits, Large HSAs involve no government spending and would not mandate that taxpayers purchase health insurance, as existing HSAs and health-insurance tax credits do. (The bill and its sponsors describe that requirement as a “mandate.”)
  3. Flake-Brat would make health care better, more affordable, and more secure. It would do so by dramatically reducing government’s influence over the health care sector. By shifting from employers to consumers nearly a quarter of the $3 trillion Americans spend annually on health care, Large HSAs would begin to make the health care sector and health policy respond to the needs of patients. Large HSAs are also less restrictive than existing HSA law or health-insurance tax credits. As a replacement for ObamaCare, Large HSAs would encourage innovative products like pre-existing conditions insurance that make coverage more affordable and secure.
  4. Flake-Brat shows Congress could create Large HSAs with or without repealing ObamaCare. Large HSAs are the most promising ObamaCare replacement plan to date, but Congress can create them before it repeals ObamaCare. The Flake-Brat bill would create Large HSAs even with ObamaCare still on the books. In fact, Flake-Brat would build support for repealing ObamaCare by exposing consumers to the full cost of its hidden taxes.
  5. Flake-Brat is a marker. The Flake-Brat bill defers consideration of a number of issues. All else equal, expanding tax breaks for HSA contributions would reduce federal revenues and increase federal deficits and debt. Like any proposal to level the playing field between employer-sponsored coverage and other coverage, the bill creates the potential for employer plans to unravel as (healthy) people choose better options. Were Congress to enact Flake-Brat with ObamaCare still on the books, there could be even more complicated interactions. The bill doesn’t totally level the playing field, either. Everyone would get an income-tax break, but only those with an employer who facilitates HSA contributions would get the payroll tax break. (Large HSAs can completely level the playing field with a simple tax credit that mimics that exclusion for such workers.) The authors don’t address these issues in the bill, or their supplemental materials. They will have to address them at some point. Fortunately, there are solutions. (For more on those solutions, see the “developed” links in the second paragraph.)

All in all, the Flake-Brat bill is a much-needed addition to the debate over the future of American health care.

Lessons from NYC’s Randomized Conditional Cash Transfer Program

The research organization MDRC recently released its comprehensive evaluation of Opportunity NYC- Family Rewards, a conditional cash transfer (CCT) pilot program with the goal of helping families break free of the cycle of poverty. This program is particularly notable because it is the first comprehensive CCT program in a developed country, and it was a large-scale randomized control trial. CCTs offer cash assistance, but only if certain conditions are met, in this case these conditions are concentrated in the three spheres of children’s education, preventive health care utilization and parents’ employment. There was no case management component to the program, the cash-based incentives were the only mechanism in place. The initiative had the twin goals of reducing current poverty (material hardship) and incentivizing these low-income families to invest in developing their human capital, which is important for their ability to attain a level of self-sufficient prosperity. After the conclusion of the three-year pilot program, while the program’s cash transfers produced some results in the first goal of reducing material hardship, as you might expect from a significant cash transfer to families with otherwise limited incomes, it failed to have much of an impact in its second goal related to the development of human capital. Family Rewards failed to produce any meaningful effects. There are caveats to what these findings mean in a broader sense, but they convey some of the limitations of transfers, and of antipoverty policies in general, in addressing the more complex and difficult aspects of poverty.

Six community-based organizations ran the Family Rewards pilot in six of the city’s communities with the highest levels of poverty, with the program running for three years concluding in August 2010. MDRC split roughly 4,800 families with 11,000 children into treatment and control groups, and analyzed the effects of the CCT program on a range of different metrics by comparing the groups at two and six years after the program began. Family Rewards included 22 different rewards tide to specific activities like taking the PSATs, attending parent-teacher conferences, and sustaining full-time work.

Throughout the three years of the program, participating families received an average of over $8,700 with a majority of those families receiving at least $7,000 and the top quintile receiving more than $13,000 in cash transfers. These substantial cash transfers reduced the share of families in poverty by 12 percentage points (from a baseline of 68 percent in poverty). There were associated reductions in measures of material hardship like the proportion of families dealing with food insufficiency or inability to pay rent, relative to the control group. These gains were concentrated among families living in severe poverty, while the reductions in hardships were “small and statistically insignificant among those whose poverty was not as severe at the time they began the program.”

Johnson and Weld Are Right, Clinton Is Wrong: Congress Should Privatize the VA

Listening to Hillary Clinton put her big-government ideology before the needs of veterans (see below video) brings to mind an email exchange I had recently with a correspondent who had questions about privatizing Medicare, Medicaid, and the Veterans Health Administration.

The video is an interview with Libertarian presidential and vice presidential candidates Gary Johnson and Bill Weld into which MSNBC interjected a telephone interview with Democratic candidate Hillary Clinton. Clinton protests (starting at 4:20) that Congress should not privatize the VHA, while Bill Weld, a former two-term Republican governor of Massachusetts, gives one of the best explanations I’ve seen of why it should (10:00).

The email exchange follows the video.

Wanna Fight Superbugs? Stop Overprescribing Government

PHILADELPHIA, PA - JUNE 15: Dr. Ezekiel Emanuel speaks onstage at the Klick Health Ideas Exchange on June 15, 2015 in Philadelphia, Pennsylvania. (Photo by Neilson Barnard/Getty Images for Klick Health)

Ezekiel Emanuel notices that inflated demand for antibiotics has led to overuse, and that antibiotic-resistant infections may be killing 23,000 Americans per year. He notices the pharmaceutical industry is focusing more on expensive non-cures for cancer that only extend life by months than on new antibiotics. But he hasn’t noticed that government intervention is causing these problems, so he thinks the solution is—you guessed it—even more government.

Government Inflates Demand for Antibiotics

In the Washington Post, Emanuel warns that “high patient demand leads to overprescribing” of antibiotics, which “breeds resistance” and can lead to superbugs against which we humans have no defenses.

Yet the main reason patient demand is so high is that the federal government—through Medicare, Medicaid, the tax code, Emanuel’s beloved ObamaCare, and other measures—have anesthetized patients to the cost of antibiotics and everything else. We would have less antibiotic overuse and resistance if government just let people keep their own money to spend on health care.

Government Distorts Pharmaceutical Research

Emanuel then complains pharmaceutical manufacturers are spending far more money to research and develop cancer treatments that only add a few months to cancer patients’ lives (and cost more than $100,000 a pop) that they spend developing lower-cost antibiotics.

If this state of affairs fails to reflect patients’ preferences, perhaps the reason is that Medicare offers to make drug companies and oncologists fantastically wealthy by paying for cancer treatments regardless of value.

Overprescribing Government

Rather than admit that government can be incompetent to the point of contributing to the problems it is trying to solve—as his fellow Obama-administration alumnus Larry Summers does—Emanuel doubles down on the Big Government ideology. He proposes requiring hospitals to track antibiotic (over)use as a condition of receiving Medicare subsidies.

Does it occur to Emanuel that a Medicare program stupid enough to subsidize five decades of antibiotic overuse might not be competent enough to track, much less solve that problem?

Next, Emanuel illustrates why the passive voice should be unconstitutional: “every antibiotic prescription should be electronically reviewed to be certain it meets national guidelines.” Like many devotees of the passive voice, Emanuel employs it to hide what he means, which is: “The federal government and its agents should review every antibiotic prescription you and your family receive, even when the government isn’t paying for it.”

What could possibly go wrong? I mean, can you imagine any reasons why people might want a little privacy when it comes to their use of antibiotics? Emanuel can’t—or he doesn’t care.

Finally, he proposes to have the federal government award $2 billion prizes to anyone who secures FDA approval for a new antibiotic. A system of prizes might actually do a better job than the federal government’s patent system of encouraging antibiotics R&D. But Emanuel does not address such thorny questions as who gets to define which new antibiotics will qualify; who sets the amount of the prize; what sort of complications financing the prizes would create; how this award would affect the FDA, and lobbying of the FDA; or whether the net effect of this system would be positive or negative.

Ezekiel Emanuel has no time for such trifles. He’s got himself a hammer, and by God he’s found a nail.

Conclusion 

Government is like antibiotics. Some amount is necessary. But overprescribing it makes things a lot worse.

A good indication you’ve overdosed on the statist Kool-Aid is when you make dismissive comments like this one Emanuel levels at current antibiotic-tracking programs: “Unfortunately, they are voluntary.”

Five Facts about the Minimum Wage

1. A dozen California metropolitan areas – including big cities like Fresno, Stockton, Bakersfield and Modesto – already have unemployment rates from 8.0% to 18.6%. Yet California’s statewide minimum wage is now scheduled to rise every year through 2022.

2.  News reports imagine that raising the minimum wage will push up other wages, so average wages would supposedly rise more quickly. On the contrary, three of the four most recent increases in the federal minimum wage were quickly followed by prolonged stagnation in average wages.  change in avg and min wage

3. In 2015, twice as many earned less than the $7.25 federal minimum wage (1,691,000) as the number paid that minimum wage (870,000).

4. Every time the federal minimum wage has been increased the number earning less than that minimum always increased dramatically.  This was not just true of teenagers but (as the graph below shows) also for those over 25.  When the minimum wage is pushed up faster than the market would have moved it, the effect is to greatly increase the proportion of jobs paying less than the minimum (including working for cash in the informal economy).  Employers offering less than the minimum, legally or otherwise, then enjoy a flood of unskilled applicants unable to compete for scarcer opportunities among larger businesses subject to minimum wage laws. Such intensified rivalry for sub-minimum-wage jobs then pushes the lowest wages even lower.more were paid less than min when min wage went up

 5. Regardless of federal, state or city laws, the actual minimum wage is always zero.

A Glimmer of Good News: Widespread Gains in Life Expectancy at Birth

Some recent studies have presented evidence that inequality of mortality is increasing, and that life expectancy is actually falling for some groups. Those studies generally focus on life expectancy at a certain age threshold, usually 50. In a recent paper in the Journal of Economic Perspectives, authors Janet Currie and Hannes Schwandt instead focus primarily on gains in life expectancy at birth. They find that, along this metric, inequality in mortality has fallen significantly in recent years, and that the gains in life expectancy have been widely shared. Given the impact of childhood health on health later in life, these findings suggest “today’s children are likely to face considerably less inequality in mortality as they age than current adults.” Despite the headlines, there have been impressive gains in life expectancy and reductions in mortality in recent years, especially for children.

There are three different methods of analyzing inequality in mortality: across counties, by educational attainment, and by career earnings. The latter two approaches have been more commonplace in the recent literature. As the authors note, analyzing by education suffer from changes in the underlying composition of the categories they are using. In people with only a high school education in 2010 was much different than the group with the same level of educational attainment twenty years ago. Using relative income levels runs into some data limitations and problems with reverse causality, in that some cases poverty or limited might be caused by health issues instead of the other way around. For these reasons, the authors instead turn to the third method and analyze inequality in mortality by geographic region, counties in this case.

Little Sisters Win as John Roberts Again Balks at Calling Balls and Strikes

The Supreme Court issued a short, unanimous opinion in the contraceptive-mandate cases known as Zubik v. Burwell. There’s plenty of punditry out there for you to read so I’ll just offer three thoughts:

1. This was the biggest punt in Supreme Court history.

The Court abdicated its duty to say what the law is in favor of wiping the slate clean and telling the lower courts to facilitate a settlement between the parties. This is a cop-out. If the justices were hopelessly deadlocked 4-4 regarding the legal issue presented in the case – whether there was a way for the government to achieve its free-contraceptives-for-all goal in a way less-burdensome on religious employers – then they should’ve held the case for reargument at such a time as there’s a ninth justice to provide the tie-breaking vote.

2. The challengers win.

Although the opinion goes out of its way to state that the Court takes no position on the questions of whether (a) the contraceptive mandate poses a “substantial burden” on religious free exercise, (b) the government’s interest was compelling, and (c) the current regulations are the least-restrictive means of achieving that interest, it’s clear that the justices think that the government and nonprofit challengers are close enough in their legal positions that they can just “work it out.” In other words, after an unusual round of supplemental briefing wherein the Court asked the parties to speculate on what kinds of regulations might avoid involving religious employers in what they consider to be sinful behavior, the justices think there may well be a workable solution: simply have the employers object and let the government handle the rest (dealing with insurers and otherwise). Even Justices Sotomayor and Ginsburg, who concurred specially to protest (too much?) that lower courts should be free to continue ruling for the government, essentially accepted the “I object” solution so long as the resulting insurance/contraceptive coverage is “seamless.” 

If that’s correct, then the Court has essentially conceded that the challengers should have won their claim under the Religious Freedom Restoration Act – wherein, as the Hobby Lobby case showed two years ago, the government loses if there’s a way it can achieve its goal in a way that imposes less of a burden on the religious rights of the objecting parties. So really, the end result, assuming the lower courts don’t engage in a bout of judicial disobedience (not a slam-dunk assumption given how some courts have treated the Second Amendment in the wake of Supreme Court rulings in that regard) should be the same as if the Court, with Justice Scalia, had ruled 5-4 for the Little Sisters et al.

3. The legal precedent doesn’t matter.

RFRA is an unusual statute in that it’s meant to be applied case-by-case, so a ruling in favor of peyote-smokers says nothing about how judges should rule regarding prison beards – or objectors to contraceptive mandates. Contra the progressive alarmists in the wake of Hobby Lobby, a successful RFRA claim regarding one aspect of Obamacare implementation doesn’t mean that left-handed lesbians now have to sit in the back of the bus (or however the tired parade of horribles went). So even though the Court declined to adopt my argument (or any other) in the case, it doesn’t mean that our liberties are diminished in future or that the government can exceed its lawful powers in some future case.

In sum, the wily chief justice persuaded his colleagues to go in for a non-judicial non-decision. I may like the practical result here, but this isn’t law.