What Are the Financial Risks of Being Uninsured?

priceless_180x270Previously, Chris Conover showed that the medical risk of being uninsured is small:

...[T]he evidence that having health insurance will reduce mortality risk by any significant amount is pretty thin...even if we assume that having coverage reduces the chance of early death by 22 percent, this is comparable to a half dozen other risks that people face. For the same amount as we are spending to expand coverage under Obamacare, we could save eight times as many lives by focusing on other causes of death such as smoking.

See also his analysis of the claim that failure to expand Medicaid kills people and Linda Gorman on the same subject.

In his latest post, Conover shows that the financial risks are small as well:

I have calculated the medical bankruptcy risk facing those with continuous coverage at 1.25 per 1,000. Eliminating this difference would evaporate the risk of medical bankruptcy for 1.89 people out of every 1,000 uninsured Americans every year.

...[I]f having coverage could reduce bankruptcy risk by 1.89/1,000, what would that mean? First, the overall difference in bankruptcy risk (inclusive of medical and non-medical causes) between those with health insurance and those without is 10.7 per 1,000, so eliminating the “excess” risk of medical bankruptcy that we are assuming can be attributed to lack of health insurance coverage would shrink this difference by less than 20%. Perhaps more astonishing, such a reduction would shrink an uninsured person’s overall bankruptcy risk by a mere 11% (from 17.9 to 16.1 per 1,000).

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For the pivotal alternative to Obamacare, please see the Independent Institute’s widely acclaimed book: Priceless: Curing the Healthcare Crisis, by John C. Goodman.

[Cross-posted at Psychology Today and John Goodman’s Health Policy Blog]

Tolstoy’s Remarkable Manifesto on Christian Anarchy and Pacifism

L.N.Tolstoy_Prokudin-GorskyI’ve just finished reading Leo Tolstoy’s remarkable book The Kingdom of God Is Within You. This was written in Russian and completed in 1893, but the Russian censors forbade its publication. It circulated in unpublished form in Russia, however, and was soon translated into other languages and published abroad. It had substantial influence on the course of history, perhaps most of all because of its influence on Gandhi.

The book is odd in several respects. In a purely literary sense, it is by no means a masterpiece, as Tolstoy’s great novels, written earlier in his life, were. In places it reads more like a set of notes for a book than as a polished work. For example, it contains many very long block quotations and much unnecessary repetition. However, Tolstoy’s mastery as a writer still shines in the brilliance of some of his formulations, especially in the second half of the book.

Odd, too, is Tolstoy’s own curiously uneven command of different aspects of his subject. In regard to the nature and operation of the state and the sociology of human interrelations in the socio-political order, Tolstoy’s clear-eyed insights cut to the quick. He makes even an analyst such as James Buchanan, who complained about people’s “romantic” views of politics and the state, seem utterly romantic. In contrast, Tolstoy’s understanding of economics was abysmal and leads him into foolish notions of the equivalence between state acts and capitalist acts. He seems also to have given no thought to what the consequences would be if his communistic preferences about the distribution of property were adopted in practice. Although he had excellent insights into the role of (what I call) ideology in the maintenance of the state-dominated social order, he entertained a view of how the dominant ideology was changing and would continue to change that seems to me completely lacking in contemporary evidence and utterly at variance with everything we now know about how ideology did change during the past century or so. He greatly overestimated the hold that Christian morality had on the souls of people in the West at the time he was writing, not to speak of later, even less Christian times.

Tolstoy is one of the most important Christian anarchists in history, yet his views on Christianity were anything but typical. For example, he regarded the various Christian churches as totally corrupt and as the propagators of false and spurious doctrines that only helped the dominant elites to retain their hold on political, social, and political power while oppressing the great mass of the people. Self-serving members of the upper crust were, in his eyes, willing to avert their eyes from the truth, especially the Truth of Christianity as expressed above all by the Sermon on the Mount. This sermon, indeed, seems to have amounted to not only the heart of Tolstoy’s Christianity, but to the bulk of it, as well. For him, Christianity was above all a commitment to love others as one’s self and to abstain from the use of force and violence, even in resistance to evil or in self-defense. Thus, as a Christian anarchist, he comes close to occupying a class of his own (though not quite all his own).

I plan to write at greater length about Tolstoy’s fascinating book for a future “Etceteras” feature in The Independent Review. Aside from its interest as a manifesto for Christian pacifism and anarchism, the book contains many anticipations of ideas later developed in economics and public choice, and it deserves much greater attention in these regards than it has previously received.

Want to Start a Private Postsecondary School in California? Good Luck

10226856_MNot everyone wants to attend a traditional four-year college. A lot of people want to learn a trade and start a career immediately out of high school. Vocational schools have served these people in the past and helped them learn a trade in fields such as automotive repair, cosmetology, or nursing.

Other people want more flexibility than a traditional college typically provides and opt for small for-profit colleges, many with evening classes. But government bureaucrats are stifling entrepreneurs who want to start new private postsecondary schools in California.

California’s Bureau for Private Postsecondary Education issues licenses for new private postsecondary educational institutions in California, including both degree-granting academic institutions and non-degree-granting vocational institutions. A new state audit blasts the Bureau for significant backlogs and chronic delays in processing applications to start new schools.

The California State Auditor Elaine Howle found:

  • The Bureau had more than 1,100 applications outstanding as of June 30, 2013
  • Some applications had been sitting at the Bureau for almost three and a half years
  • The Bureau took three times as long as its goal to process the applications it received in fiscal year 2009–10 through 2012–13

State Auditor Howle concluded this is a serious problem because: “[U]ntil the Bureau approves their applications, institutions seeking to provide private postsecondary educational services to students are not allowed to operate in California.”

The chief of the licensing unit even admitted that the Bureau does not track the status of each application it receives because its database doesn’t have this capability.

Let’s recap: California was struggling to climb out of the worst recession since the 1930s; people were desperately seeking re-training and new skills; entrepreneurs prepared innovative business plans to meet these needs; but California’s bureaucrats kept teachers from helping students when they needed it most, sometimes for years.

This is your government at work . . . but hopefully not for long.

The Bureau will cease to exist effective January 1, 2015, unless the legislature extends or cancels this date. The legislature should ensure this inept and counterproductive bureaucracy dies a quiet death.

From July 2007 through December 2009, the state of California did not regulate private postsecondary educational institutions, and the world didn’t end. And it won’t end again if California stops this unnecessary regulation. In fact, things would improve if entrepreneurs are allowed to respond quickly to changing educational demands and to help students prepare for their chosen careers on schedules that meet their needs.

Los Angeles County Board of Education Blocks LAUSD “Blackmail” of Charter Schools

blackmail-e1349540956302In February the Los Angeles Unified School District board revoked the charters of Aspire Antonio Maria Lugo Academy and Aspire Ollin University Preparatory Academy—not because they didn’t perform, but because they did at a fraction of the cost.

LAUSD officials revoked the charters of these two top performing, high poverty schools enrolling 770 (mostly Latino) students because of cold, hard cash. Of course, the official reason board members gave was that they were acting on behalf of “the children,” special needs children to be exact.

The Los Angeles County Board of Education voted this week to restore the schools’ charters and at least one county board member publicly decried LAUSD’s earlier decision. As The Wall Street Journal reported:

The [LAUSD] board’s only beef was that the Aspire schools had contracted out their special education to an agency in El Dorado County, which is used by 300 other California charters. According to Aspire, the El Dorado plan is cheaper and more effective than the district’s Special Education Local Plan Area. In any event, state law doesn’t require charters to subscribe to the public option.

According to L.A. County Board of Education member Doug Boyd, the district arguably acted illegally when it rejected Aspire schools on these grounds. ‘We were shocked that LAUSD would turn down the charters,’ he says. ‘The pretext that they used was ridiculous.’

...So why did the board vote to close the schools? ‘They want the money that the state attaches to each kid,’ Mr. Boyd says.

But more fundamentally, teachers unions and their allies on the board are opposed to offering parents educational options, especially if those options expose the failure of public schools. ...While the county board which hears charter appeals has issued a resounding rebuke to L.A. Unified’s school board, Mr. Boyd says district officials have been threatening to close other charters that refuse to sign up with the district’s special-education plan. ‘How many of the charters will succumb to the blackmail?’ he muses.

Charter schools are public schools, which receive taxpayer dollars and administer the same state-approved tests as traditional district-run public schools. Two of the main charter school advantages from a taxpayer perspective are first that charters don’t have any taxing authority, so they must live within their annual budgets.

Charter schools must also compete for students and funding, and if they don’t perform, they can be shut down—and when was the last time a district-run school was shut down because it wasn’t performing? More likely than not, a failing district school gets more funding.

Currently, more than one out of every 10 public schools in California is a charter school, and more than half a million students attend charter schools instead of district schools. Yet the supply of charter schools isn’t keeping pace with demand, since close to 50,000 students are now on charter school waiting lists, including 15,000 in LAUSD alone.

Thankfully, Los Angeles’ County Board stepped up and did the right thing, but a more fundamental issue remains. When government entities are calling the schooling shots, they will punish what works for the sake of special-interests—not students.

Charter schools are a much-needed alternative for parents whose children would otherwise be assigned to government district-run schools that don’t work. Still, as long as government is involved in schooling, charter schools in Los Angeles and across the country will remain vulnerable to blackmail stunts like the one the LAUSD school board pulled.

More on Obamacare’s “Bailout” for Health Insurers

Money-Spiral-Image-for-PostWe have written a lot about the so-called “risk corridors” in Obamacare. Risk corridors are one of three mechanisms whereby health insurers that lose more money than they expected in Obamacare exchanges get reimbursed for part of their losses.

We covered the details of the mechanism in this post. As the administration kept changing the rules, we covered it here, here, and here. The reason people are upset at this provision is that it contains an undefined taxpayer bailout of insurers’ losses under Obamacare.

Although there is another method whereby taxpayers subsidize insurers who lose money in exchanges (“reinsurance”), this has a limited liability. A third method (“risk adjustment”) moves money from insurers who profit more than expected from Obamacare to their competitors who took more risk than they had expected. It is revenue neutral for taxpayers.

A quick read of risk corridors suggest that they are also revenue neutral. But this is not the case. Payments are based on premiums paid, not claims incurred. At the risk of oversimplification, if the average premium (over all insurers) is $10,000, and the average of all claims is $10,000, the reimbursement will be revenue neutral. However, if the average of all claims is $12,000, taxpayers will be on the hook for the difference. If the average of all claims is only $8,000, the Treasury will keep the difference.


Common Core Makes Simple Math as Complicated as the Tax Code

1922508_10152143072400914_313210801_nThose of us recovering from tax day should be more than ready to answer a simple subtraction problem:

What’s 427 – 316?

If you mastered elementary math sometime before the onset of Common Core national standards and after “new math” had fallen out of fashion, then you can solve this problem in about three easy steps, moving from the ones column to the 100s column...six from seven is one; one from two is one; and three from four is one. Viola! The answer’s 111.

Thanks to a Facebook post from Frustrated Parent Jeff Severt and the subsequent media attention it’s getting, more Americans than ever are realizing the perils of government-run schooling—including the disastrous impact on mathematical skills when process becomes more important than accuracy.

Consider Severt’s Facebook post. It includes a page right out of the Common Core math lesson. The lesson asks students to find the error fictitious student Jack made in solving the subtraction problem above using a number line. The lesson then asks students to write Jack a letter explaining how he should have solved the problem. Severt writes a letter of his own to Jack urging him not to feel bad. Severt explains that he has an advanced engineering degree and that even he:

...cannot explain Common Core mathematics, nor get the answer correct. In the real world, simplification is valued over complication. ... The answer is solved in under five seconds—111. The process used is ridiculous and would result in termination if used.

And there’s the rub: nothing about Common Core math standards has anything to do with the real world.


Global Poverty and the Tyranny of Experts

Recovering former World Bank economist William Easterly has a new book on the folly of top-down development aid, The Tyranny of Experts: Economists, Dictators, and the Forgotten Rights of the Poor.

As its title suggests, Easterly emphasizes the pernicious role played by technical “experts” from international development agencies in crafting policies that encourage authoritarian regimes to trample on the liberties of their most impoverished populations. The massive rights violations are themselves morally objectionable, he notes, but by the standard of economic development, they are also wholly counterproductive.

“The technocratic approach,” Easterly writes, “ignores what this book will establish as the real cause of poverty — the unchecked power of the state against poor people without rights.”

Easterly attributes the “tyranny of experts” pathology partly to the legacy of imperialism and racism, and partly to a “top down” mindset that is ambivalent about a country’s history and ignorant about the potential for economic development driven by local entrepreneurs.


Why Won’t Medicare Pay for Medical Tourism?

medical-tourismIn a working paper published by the Mercatus Institute at George Mason University, Marc D. Joffe notes that Aetna, Blue Shield, and HealthNet offer health insurance in California that gives beneficiaries access to Mexican providers. The U.S. insurers rent a provider network from a Mexican insurer.

The costs of health care in Mexico are 60 percent to 80 percent lower than in the United States. Cash-paying Americans travel to Mexico for many medical procedures. Joffe cites estimates of around half a million Americans annually visiting Mexico for medical care (although the number travelling only to fill prescriptions is not reported).

Joffe notes that 25,000 Americans living in Mexico in 2011 were receiving Social Security deposits. Unlike half a million other Americans who travel to Mexico for treatment, these retirees and their spouses return to the United States for treatment. The reason is that Medicare does not pay for their treatment out of country.

Joffe doesn’t estimate how much money Medicare would save if it paid for their treatment in Mexico, but a back of the envelope estimate is not hard to figure out.


Obamacare’s Cost Is Down 8%, but That May Not Be Good News

But so is access to doctors and hospitals in the plans offered on the health insurance exchanges.

A Congressional Budget Office report estimates lower federal spending (see the figure). The reason: Health plans in the exchanges look more like Medicaid than like employer-based coverage. Jason Millman reports:

The CBO report points out that it previously thought Obamacare’s exchange plans would look more like employer-based coverage, but that hasn’t turned out to be the case so far — hence, the cheaper premiums. “The plans being offered through the exchanges this year appear to have, in general, lower payment rates for providers, narrower networks of providers, and tighter management of their subscribers’ use of health care than employment-based plans,” CBO wrote.


Gov. Bobby Jindal’s Health Reform Proposal: Pros and Cons

11935359_SGov. Bobby Jindal (R-LA) has joined the number of Republicans with an alternative health reform. His Freedom and Empowerment Plan doesn’t mince words on repealing Obamacare:

The American people are in favor of repealing Obamacare. But conventional wisdom in Washington holds that the law cannot be fully repealed. I couldn’t disagree more. A country that won two world wars and landed a man on the moon can surely eradicate this attack on our health care system.

Much of what is in his outline is found in other Republicans’ proposals. Jindal would demand that states “guarantee access” to people with pre-existing conditions, through a “high-risk pool, reinsurance, or some other method ensuring those with chronic conditions can obtain needed care.”

Expanding the options for “guaranteeing access” beyond high-risk pools is very promising: “Reinsurance” is what we call “change of health status insurance,” which both protects those with pre-existing conditions and gives insurers incentives to enroll them (as described in John C. Goodman’s Priceless: Curing the Healthcare Crisis, pp. 183-184).