The Massachusetts health care law that Gov. Mitt Romney signed in 2006, and the nearly identical federal law that President Obama signed this year, create perverse incentives that are causing health insurance costs to rise and could eventually cause health insurance markets to collapse. A report released yesterday by the Massachusetts Division of Insurance shows that process is well underway.
Massachusetts requires health insurance companies to sell to all applicants, and imposes price controls that require insurers to charge all applicants the same premium, regardless of their health status. ObamaCare would do the same.
Those price controls have two principal effects on healthy people. First, they increase the premiums that insurers charge healthy people (the additional premium goes to reduce premiums for sick people). Second, they enable healthy people to wait until they are sick to purchase coverage. Since insurers must take all applicants, and charge them the same premium, there is little or no downside to waiting until one gets sick to purchase coverage.
Those price controls also guarantee that when healthy people drop out of insurance pools, premiums rise for everyone who remains, which causes more healthy people to drop out, and do on. Economists and actuaries call this an “adverse selection death spiral.”
The Boston Globe reports that the Massachusetts Division of Insurance found that in the wake of RomneyCare, many more healthy residents are purchasing coverage only when they need it:
The number of people who appear to be gaming the state’s health insurance system by purchasing coverage only when they are sick quadrupled from 2006 to 2008, according to a long‐awaited report released yesterday from the Massachusetts Division of Insurance.
The result is that insured residents of Massachusetts wind up paying more for health care…
The number of people engaging in this phenomenon — dumping their coverage within six months — jumped from 3,508 in 2006, when the law was passed, to 17,177 in 2008, the most recent year for which data are available.
In the hope of preventing this sort of gaming behavior, RomneyCare requires Massachusetts residents to purchase health insurance. Yet that “individual mandate” appears not to be working, probably because the penalties for non‐compliance are far less than the cost of the mandatory coverage. Thus many residents decline to purchase health insurance, pay the penalty (or misrepresent their coverage status), and purchase health insurance only when they need medical care.
ObamaCare contains similar price controls and requires nearly all Americans to purchase health insurance by 2014. Yet ObamaCare’s penalties for non‐compliance are also far less than the cost of the required coverage for most people.
As goes Massachusetts, so goes the nation.
Yesterday, Bill Gates addressed 4,100 charter school leaders and activists and told them that their movement “is the only place innovation will come from.”
Certainly there are innovative charter schools–and others that deploy traditional methods with such skill and dedication as to achieve results far above the norm (think Ben Chavis’ American Indian Charter Schools in Oakland). But of course charters are not the only source of educational innovation, and, much more importantly, they are unlikely to drive the process of mass replication and scale‐up of innovations responsible for the stunning economic progress of the past several hundred years.
Pick any field in which a brilliant innovation has been capitalized on and brought to the masses and you will likely find that it is capitalist–part of the profit‐and‐loss, free enterprise system.
There are occasional exceptions. The Jesuits introduced performance‐based grouping in 1599, promoting students to the next grade whenever they had mastered the material of the current one, and managed to scale‐up that policy internationally. But only free markets have created an ever‐repeating cycle of innovation, replication, and dissemination that continues decade after decade, seldom pausing or reversing except due to some external calamity.
There are efforts afoot by business and financial leaders to emulate that cycle within the charter school framework. We should wish them well, but it’s a daunting task. As Friedrich Hayek explains in The Fatal Conceit, the web of freedoms, customs, and incentives we call free markets was not designed by earlier generations, but rather evolved inexorably over time. It is not a product of human planning, but of human nature.
Trying to reproduce the innovation, replication, dissemination cycle outside the free market system is like trying to make a wheel more round by increasing or decreasing the value of pi–and it’s just as unnecessary. We already have a system for accomplishing what Gates and the American public desire, why not use it? Why don’t we simply ensure that all children, regardless of family wealth, can afford access to a free education marketplace? The innovation and dissemination process will then take care of itself, as it does in every other field.
That’s the name of the website of Jack Dean, who is interviewed in this new Reason.tv video about how excessive pension promises to bureaucrats are creating a fiscal nightmare for state and local governments.
In a recent Wall Street Journal oped, Carnegie‐Mellon economist Allan Meltzer explains how ObamaCare is delaying economic recovery:
Two overarching reasons explain the failure of Obamanomics. First, administration economists and their outside supporters neglected the longer‐term costs and consequences of their actions. Second, the administration and Congress have through their deeds and words heightened uncertainty about the economic future. High uncertainty is the enemy of investment and growth…
Mr. Obama has denied the cost burden on business from his health‐care program, but business is aware that it is likely to be large. How large? That’s part of the uncertainty that employers face if they hire additional labor…
Then there is Medicaid, the medical program for those with lower incomes. In the past, states paid about half of the cost, and they are responsible for 20% of the additional cost imposed by the program’s expansion. But almost all the states must balance their budgets, and the new Medicaid spending mandated by ObamaCare comes at a time when states face large deficits and even larger unfunded liabilities for pensions. All this only adds to uncertainty about taxes and spending.
Meltzer concludes that the Obama administration is making the same mistake as FDR: “President Roosevelt slowed recovery in 1938–40 until the war by creating uncertainty about his objectives. It was harmful then, and it’s harmful now.”
For more on the harm caused by government‐created uncertainty, read my colleague Tad DeHaven’s recent posts.
More highlights from Day 2 of the Kagan confirmation hearings:
• In addition to backing away from President Obama’s empathy standard, Elena Kagan, under questioning by Senator Grassley, backs away from her “judicial hero” Aharon Barak, saying that she does not share his judicial philosophy, which involves judges making policy decisions and affirmatively shaping society. This is an important concession. Grassley also elicits the statement that only the president and Congress should worry about American influence in the world.
• The wily Arlen Specter, in his last Supreme Court hearing (unless Justice Ginsburg retires over the summer), treats his questioning as a prosecutor would. Technical questions and cutting off responses when Kagan begins to expound on the current state of the law, when what he really wants to know is what she thinks about the law. Unfortunately, Specter accepts Kagan’s statements that she respects Congress but does not press her right when the next question would demand an actual opinion on Citizens United or on Morrison (an important case in which the Court struck down the Violence Against Women Act as beyond Congress’s powers to regulate interstate commerce). Kagan admits that Citizens United was a “jolt to the system” because states had relied on the pre‐existing campaign finance regime. Unfortunately, this is again an empirical statement rather than a normative one.
• Kagan does express a firm opinion in favor of televising Supreme Court proceedings (this is one of Specter’s bugaboos). “I guess I’ll have to have my hair done more often,” she says.
• Lindsey Graham is definitely worth the price of admission. First he prompts Kagan to admit that “my political views are generally progressive” after she declined to characterize herself in anyway in response to previous senators’ queries. Then he gets her to endorse her classmate Miguel Estrada for the Supreme Court (which may be of interest to General Petraeus, who testified before another Senate committee today). Finally, in questioning regarding the Christmas Day bomber, he provokes an ethnic love‐in after his question about where Kagan was on Christmas Day elicits the response, “well, like all Jews, I was probably at a Chinese restaurant.” As he did with Sotomayor, Graham makes clear that he is likely to disagree with many of Kagan’s judicial decisions, but will vote for her regardless.
• John Cornyn is the first senator to push the size and scope of government as a major line of questioning. He asks her one of my pet questions: What limits are there on government?” Kagan replies by reciting the Commerce Clause standards set forth in existing precedent, that Congress cannot touch activity that is not economic or that is left traditionally to state power. Well, that’s progress, but of course it raises the question of whether forcing someone to buy health insurance involves regulating economic activity and whether health care regulation is a traditional state responsibility.
• Tom Coburn picks up where Cornyn left off, proposing a hypothetical bill requiring everyone to eat three fruits and three vegetables per day. Kagan considers that a “dumb law” but says that “courts would be wrong to strike down laws simply because they are senseless.” Well, ok, but is that particular senseless law unconstitutional? Kagan seems pained (in real psychic discomfort) but Coburn lets her off the hook in reading from the Federalist Papers—a nice edition that should make for a good picture in the Oklahoma papers—and talking about the explosive growth of government. Kagan shrugs off this discursion by citing Marbury v. Madison—“the role of the courts is to say what the law is”—and concluding that deficits aren’t a problem courts can resolve, at which point Coburn’s time runs out. We will revisit this issue.
In short, Kagan is without doubt smarter, wittier, and more collegial than Sonia Sotomayor. Unfortunately, that means she is likely to be more dangerous, a true “liberal Scalia.” We now know that two of the catchphrases from these hearings will be that “I’m not going to grade cases”—why not?—and that everything the Court has ever decided is “well‐settled law.” In my mind, Kagan has not yet met the burden of persuasion regarding constitutional limits on government, which is my focus at these hearings. I would look for Senators Sessions, Cornyn, and Coburn to hit this issue hard on the next go‐around.
CP at Townhall
In questioning by Senators Hatch, Kyl, Feingold, and Grassley, Elena Kagan revealed that she has a firm grasp on legal precedent, including what exactly the Court said in Citizens United (as distinct from what President Obama said about the case in his State of the Union address). However, other than an explicit rejection of Obama’s empathy standard—she endorsed “law all the way down” rather than “heart” or “empathy” for “that last five percent”—we still don’t know what she actually thinks about any of these cases. She wouldn’t even go so far as to criticize Citizens United—a case she herself argued from a position she admitted she thought was right at the time. So everything the Court has ever decided is right? That can’t possibly be right; no lawyer or scholar in the country could possibly agree with every single thing the Court has done in the last year, let alone in the history of the Republic. Well, Solicitor General Kagan, tell us, then, which cases were decided incorrectly—whether or not they should be overruled given other considerations.
To give an example, the two gun cases Heller and McDonald: Kagan has said that judges must respect a precedent unless it proves unworkable or new facts emerge that would change the circumstances of a case. Is it possible for any new facts to emerge that would allow a future Court to determine that the Second and Fourteenth Amendments do not protect an individual right to keep and bear arms for self‐defense? If recognition of the right proves “unworkable,” would the proper remedy come from the Supreme Court or a constitutional amendment repealing the right?
More generally, I’m still waiting on Kagan to indicate that the Constitution limits government power in any way—as opposed to merely being challengeable for allegedly violating individual rights. The Constitution provides for a government of delegated, enumerated, and therefore limited powers, after all, so where do those limits lie. Can the federal government regulate activity that is neither commerce nor crosses state lines? What can Congress force people to do under its power to regulate commerce? Can Congress make any crime a federal crime? Can the government rewrite leases, mortgages and other contracts? What kind of protections does the Fifth Amendment’s takings clause give to private property? To be fair, there haven’t been many of these types of questions—and I hope the senators go into these lines of questioning in the remaining time they have—but I firmly believe that a judicial nominee bears the burden of persuading all of us that she understands the Constitution and the governmental structure it creates, not just Supreme Court decisions.
CP at Townhall
A confession: For all my innumerable policy disagreements with Barack Obama, on election night 2008, I found myself cheering with the rest of the throng on U Street. I fully expected to be appalled by much of his agenda — but I had also spent years covering the Bush administration’s relentless arrogation of power to the executive in the name of the War on Terror, its glib invocation of “national security” to squelch the least gesture toward transparency or accountability, its easy contempt for civil liberties and the rule of law. However fitfully, I thought, we could finally hope to see that appalling legacy reversed. And that seemed worth celebrating even if little else about the declared Obama agenda was.
As you might guess, I had a lot of disappointment coming — and not just with Obama. There were, of course, principled civil libertarians on the left, like Salon’s Glenn Greenwald and Firedoglake’s Marcy Wheeler who kept banging the drum with undiminished fury. But many progressives seemed prepared to assume that Bush’s War‐on‐Terror policies would be out the door close on the heels of their author — conspicuously muting their outrage even as the reasons for it persisted. Meanwhile, the right — disappointingly if not entirely surprisingly — managed to fuse a penchant for breathless Stalin analogies with an attitude toward expansive surveillance powers and arbitrary detention authority that ranged from indifference to endorsement.
So it’s a little encouraging to see evidence over the last few weeks that burgeoning progressive disenchantment with Obama along a number of dimensions seems to be bringing these issues back into sharper focus. In a recent interview in Der Spiegel, Daniel Ellsberg of Pentagon Papers fame (described by the paper as a “lefty icon”) blasted Obama for “continuing the worst of the Bush administration in terms of civil liberties.” ACLU director Anthony Romero declared himself “disgusted” with the president, and Kevin Drum of Mother Jones catalogued a slew of reasons to agree with that appraisal. The real test of an issue’s salience, however, is whether it makes The Daily Show, and so perhaps the most significant bellwether is Jon Stewart’s decision to devote an unusually long and blistering segment to Obama’s failure to live up to his rhetoric on civil liberties and executive power:
|The Daily Show With Jon Stewart||Mon — Thurs 11p / 10c|
|Respect My Authoritah|
Democrats have spent most of the past decade playing defense against “soft on national security” attacks from the right, on the assumption — borne out thus far — that the base wasn’t going to punish them for folding on civil liberties issues. But while many progressive complaints now being aired are themselves the product of an unrealistic view of presidential puissance, this really is one sphere where the president has enormous latitude to unilaterally affect policy. It’s therefore also a set of issues where scant progress can’t easily be blamed on Republican obstructionism.
During the Bush era, we saw the brief emergence of a small but hardy left‐right “strange bedfellows” coalition opposed to the FISA Amendments Act. Now I find myself wondering: If progressive grumblings on this front continue and grow louder, will the Tea Party movement that’s sprung up in the intervening years realize that their own rhetoric logically commits them to the same position? And if they do, will civil libertarians on the left be open to resurrecting that odd alliance?