Topic: Government and Politics

55% of Americans Say Free Market Competition Offers “Better Way” to Provide Affordable High-Quality Health Care

In his call to repeal the Affordable Care Act, also known as Obamacare, House Speaker Paul Ryan contended “there are two ways of fixing healthcare…have the government run it, ration it, and put price controls…[or] have a vibrant free market where people…go out in a free market place and buy the health care of their choosing.”

A new survey from the Cato Institute finds that 55% of Americans believe “more free market competition among insurance companies, doctors, and hospitals” offers the “better way” to provide affordable high-quality health insurance to people. In contrast, 39% say that “more government management of insurance companies, doctors, and hospitals,” would better achieve this goal.

Full Results

Respondents sort themselves along partisan lines. A majority (62%) of Democrats including leaners think that more government management of insurance companies, hospitals, and doctors is the better approach to health care reform. In contrast, majorities of non-partisan independents (57%) and Republicans including leaners (84%) think free market competition offers a better alternative.

The divide between Republicans and Democrats widens as they attain higher levels of education. Fifty percent (50%) of Democrats with high school degrees believe that free market competition would better provide high-quality affordable health care. However, this share drops to 17% among Democrats with college degrees—a 33-point swing. The share of Republicans who believe free markets better deliver high-quality affordable coverage increases from 81% among those with high school degrees to 94% among college graduates. Non-partisan independents’ attitudes don't change much with education.

These results are consistent with the theory that partisans become more likely to learn about and accept partisan cues on health care policy as they gain more political information. Independents, on the other hand, feel less inclined to accept partisan cues regardless of their political knowledge.

This is not the only survey which finds Americans prefer a free market approach to reducing costs in health care.  A Kaiser Family Foundation survey found that 51% of Americans thought free market competition would better reduce prescription drug prices than government regulation (40%).

For decades Americans have debated how to best provide access to high-quality affordable health care. Some argue that health care markets operate differently and thus require more government management to ensure people get the care they need. Others contend that, just like in other sectors, injecting free market forces into health care would incentivize lower costs, increase quality, and expand access.

These results indicate public appetite for taking a new approach to health care reform: injecting free market forces into the system in order to provide access to affordable high-quality health insurance.

Survey results and methodology can be found here. The Cato Institute in collaboration with YouGov conducted two health care surveys online February 22-23, 2017. The first survey interviewed 1,152 American adults with a margin of error of ± 2.93 percentage points. The second survey interviewed 1,103 American adults with a margin of error of ± 2.85 percentage points. The margin of error for items used in half-samples is approximately ± 5.1 percentage points.

Real Talk: Day Without a Woman

Women certainly should be celebrated for their many contributions, and “Day Without a Woman” did a little of that and a lot of advocacy for labor policies yesterday. According to the organizer’s website, the strike was intended to “call out decision-makers” on topics like the minimum wage, the gender pay gap, women’s healthcare, vacation time, and child care.

An impartial observer would likely believe that women’s prospects must be quite depressing, given the missed work, public school closures, and street protests that occurred in some U.S. cities. Luckily, American women’s social welfare and economic prospects are better than many strikers realize.

Take female leadership, for example: it would probably surprise Day Without a Woman strikers that 42% of legislators, senior officials, and managers in America are female. This figure is higher than comparable places like Canada, Western Europe, and Eastern Europe. According to World Bank data, the U.S. is at the top of the pack and has been for at least the last decade.

 

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Kenneth Boulding on the Serious Distortion of Economic Ethics

From Kenneth Boulding, A Reconstruction of Economics (NY, Science Editions 1962) pp. 481-82:

“Economic ethics has been seriously distorted by static and short-run criteria of value. ‘Justice’ has been thought of too much in terms of division of a fixed pie than in terms of encouraging the baking of more pies… .The importance of this problem rests on a matter of simple arithmetic: that if redistribution toward any group causes a fall in the rate of growth of national income, no matter how slight, there will be some date beyond which the absolute income of the favored group will be less than it would have been if the redistribution had not taken place.”

Public-private Partnerships: a Cautionary Tale from the UK

Given the administration’s plans are still as clear as mud, yesterday’s Cato event on infrastructure was necessarily wide-ranging. Panelists welcomed Trump’s desire to harness more private sector involvement, but there are many different forms policy to support this could take, from removing regulatory and user pricing barriers, right through to the distortionary tax credits proposed by his advisors Wilbur Ross and Peter Navarro.

One possibility is greater use of public-private partnerships. These entail agreements between government and a private contractor for the building, financing or operation of infrastructure with the aim of passing on substantial risk to the private sector. They can take different forms, from simply transferring management responsibilities to a private sector firm, right through to integrated contracts that incorporate the design, build, maintenance and operation of the infrastructure (for example, toll roads.)

In terms of results, types of PPPs are not created equal. As Randal O’Toole noted, “demand risk PPPs,” where a private company builds and then runs, say, a toll road for a set period of time, allow the expansion of capacity with incentives for the private firm to control long-term costs (including considering future maintenance needs) whilst alleviating taxpayers of the usage risk. Yes, there are still political risks that governments will renege on agreements, but when there are obvious cash streams from the investment linked to usage, beneficial investment can be forthcoming. Chris Edwards has previously pointed out the success of the Capital Beltway project in Virginia, for example.

Other types of infrastructure, not least provision of loss-making modes or those with no user fees, are more difficult. In these cases, public-private partnership contracts have and can be designed such that private investors build, operate and maintain an asset with a stream of tax revenue payments from the government instead.

Sadly this “availability payment” model, as Randal calls it, where the private contractor gets paid irrespective of usage, is less likely to curb costs. In fact, the UK made extensive use of this type of agreement in the building of hospitals and schools through the 2000s, and the results have been disappointing.

Success in road schemes and a number of privately-owned prisons in the early 1990s (with a much higher proportion delivered on time and on budget than through traditional procurement) led to a huge expansion of PPPs. By 2003/04 they accounted for 39 percent of capital spending by UK government departments, and there were over 500 in operation by 2008, including in the building of schools, hospitals and public transport (especially rail). Britain led the world in their use.

This expansion of PPPs though is now associated with high lifetime costs for taxpayers, not least arising from badly negotiated bundled contracts with private contractors. Many hospitals face huge deficits. Any benefits arising from the privatization of risk and on-time and on-budget delivery of projects was eclipsed by higher borrowing costs coupled with the costs of consultants and lawyers in drawing up the contracts. Furthermore, the opacity of the liabilities for taxpayers has proved very unpopular, with significant attempts to renegotiate contracts.

The House GOP Leadership’s Health Care Bill Is ObamaCare-Lite — Or Worse

During the presidential campaign, Donald Trump promised legislation that “fully repeals ObamaCare.” Monday night, the Republican leadership of the House of Representatives released legislation it claims would repeal and replace ObamaCare. Tuesday afternoon, Vice President Mike Pence will travel to Capitol Hill to pressure members of Congress to support the bill. On Wednesday, two House Committees will begin to mark-up the legislation. House and Senate leaders are hoping for quick consideration and a signing ceremony, maybe by May, so they can move on to other things, like tax reform and confirming Supreme Court nominee Judge Neil Gorsuch.

Everyone needs to take a step back. This bill is a train wreck waiting to happen.

The House leadership bill isn’t even a repeal bill. Not by a long shot. It would repeal far less of ObamaCare than the bill Republicans sent to President Obama one year ago. The ObamaCare regulations it retains are already causing insurance markets to collapse. It would allow that collapse to continue, and even accelerate the collapse. Republicans would then own whatever damage ObamaCare causes, such as when the law leaves seriously ill patients with no coverage at all. Congress would have to revisit ObamaCare again and again to address problems they failed to fix the first time around. ObamaCare would consume the rest of Congress’ and President Trump’s agenda. Delaying or dooming other priorities like tax reform, infrastructure spending, and Gorsuch. The fallout could dog Republicans all the way into 2018 and 2020, when it could lead to a Democratic wave election like the one we saw in 2008. Only then, Democrats won’t have ObamaCare on their mind but single-payer.

First, let’s look at how the main features of this bill fall short of repeal.

Misconceptions in Raj Chetty’s “Fading American Dream”

Raj Chetty, the head of Stanford’s “Equality of Opportunity” project, recently released a paper called “The Fading American Dream” co-authored with another economist, a sociologist, and three grad students. It claims that “rates of absolute mobility have fallen from approximately 90% for children born in 1940 to 50% for children born in the 1980s.” [Though the study ends with 2014, when most of those “born in the 1980s” were not yet 30.]

The title alone was sure to attract media excitement, particularly because the new study thanks New York Times columnist David Leonhardt “for posing the question that led to this research.” 

Leonhardt, in turn, gushed that Chetty’s research “is among the most eye-opening economics work in recent years.”  He explained that he asked Chetty to “create an index of the American dream” which “shows the percentage of children who earn more money… than their parent earned at the same age.”  The result, he concludes, is “very alarming. It’s a portrait of an economy that disappoints a huge number of people who have heard that they live in a country where life gets better, only to experience something quite different.”

“Another Chetty-bomb just exploded in the mobility debate,” declared a Brookings Institution memo: “Only half of Americans born in 1980 are economically better off than their parents. This compares to 90 percent of those born in 1940.”

At Vox.com,  Jim Tankersley proclaimed “The  American Dream [is] collapsing for young adults.”

“Sons born in 1984 are only 41 percent likely to earn more than their fathers, compared to 95 percent of sons born in 1940,” wrote USA Today reporter Nathan Bomey.  “If the American dream is defined as earning more money than your parents,” said Bomey, “today’s young adults are just as likely to have a nightmare as they are to achieve the dream.”

The Chetty study proved to be a politically irresistible story, since it appears to confirm a popular nostalgia for the good old days and belief that it has become more and more difficult to get ahead. But that is not what the study really shows.  What it really shows is:

First: Incomes were extremely low in 1940, so it was quite easy to do better 30 years later.

Second: Doing better than your parents is not defined by your income at age 30, but by income and wealth accumulated over a lifetime (including retirement).

Third: A rising percentage of young people remain in grad school at age 30, so their current income is lower than that of their parents at that age but their future income is likely to be much higher.

Large Majorities Support Key Obamacare Provisions, Unless They Cost Something

Support for the ACA’s community-rating provisions flips from 63%-33% support to 60%-31% opposed if it harms the quality of health care. 55% say more free-market competition not government management would best deliver high-quality affordable health care. FULL RESULTS (PDF)

Most polling of the Affordable Care Act finds popular support for many of its benefits when no costs are mentioned. However, a new Cato Institute/YouGov survey finds that support plummets, even among Democrats, if its popular provisions harm the quality of health care. The poll finds that risks of higher premiums, higher taxes, or subsidies to insurers are less concerning to Americans than harm to the quality of care. 

By a margin of 63% to 33%, Americans support the ACA’s community-rating provision that prevents health insurers from charging some customers higher rates based on their medical history. However, support flips with a majority opposed 60%-31% if the provision caused the quality of health care to get worse.

Majorities also come to oppose the ACA’s community-rating provision if it increased premiums (55% oppose, 39% favor), or raised taxes (53% oppose, 40% favor). However, threats to the to quality of care appear to be a pressure point for most Americans.